Indicator Erasmus School of Economics predicts economy grows by 2.1% in Q3
For the third quarter of 2018, Erasmus School of Economics predicts an economic growth of 2.1%, compared with the same quarter last year. This percentage is calculated with the ‘Econometric Institute Current Indicator of the Economy’ (EICIE), which is improved by using machine learning techniques and sentiment variables.
The EICIE is an indicator for the current state of the economy. Statistics Netherlands (CBS) only gives an initial impression after 45 days, but the EICIE does that simultaneously.
The EICIE is based on the input gathered from 1.4 million articles from the Dutch newspaper NRC Handelsblad. Words (e.g. inflation), short sentences (e.g. prices are rising) and expressions are coded and then summarised to produce a more useful number of variables. A neural network of five consecutive layers is used to relate economic growth (in the previous quarters) to the sentiment. This model is tested inside and outside the sample, after which the new EICIE is calculated using the most current data.
With 2.1% growth, growth in the Netherlands appears to have fallen slightly. This percentage seems to predict declining growth in 2019, something which the CPB Netherlands Bureau for Economic Policy Analysis had also expected. Researchers of Erasmus School of Economics will know whether this decline persists at the end of November when they publish the EICIE for 2018 quarter 4.
In the third week of November, Statistics Netherlands (CBS) revealed that the Dutch GDP has grown with only 0.2% in the third quarter of 2018, as compared with the previous quarter. When compared to the same quarter last year, the Dutch economy has grown with 2.4%. As such, the predictions made using the EICIE are very accurate. According to CBS, the growth was mainly driven by private consumption. Investments in fixed assets as well as export also contributed to this growth. However, they did so to a smaller extent than was the case in the previous quarter.
CBS made this first calculation based on the currently available data. The second calculation will be made public on 24 December 2018.