Can news help measure economic sentiment? An application in COVID-19 times

Abstract We construct a new newspaper-based sentiment indicator for Spain that allows to monitor economic activity in real-time. As opposed to survey-based confidence indicators that are released at the end of the month, our indicator can be constructed on a daily basis. We compare our index with the popular Economic Sentiment Indicator of the European Commission and show that ours performs significantly better in nowcasting the Spanish GDP. Moreover, it proves to be helpful to predict the current COVID-19 recession from an earlier date.