Economic Indicators from Intergalactic Alternative Data | Lord Abbett
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Economic Insights

Yes: You read that right. One can make observations about the global economy from outer space. All it takes is a keen eye and some satellite imagery.

Read time: 2 minutes

Alternative data certainly has a role to play when exploring economic indicators. It’s something we’ve explored before, most recently looking at textual scoring and grouping as a means of exploring economic sentiment. This time around, we’re looking skyward for insights. Satellites gather a lot of information while circling the globe. Here, a closer look at three categories in particular:

Manufacturing Analysis via Atmospheric Conditions

Many countries currently monitor pollution levels via satellites, as described in recent analysis by QuantCube and Citigroup. This pollution data serves a public health and environmental purpose, but it can also offer some insights as to economic activity. Levels of nitrogen dioxide are one pollutant associated with manufacturing activity. Real-time measures of nitrogen dioxide (and perhaps other pollutants) can therefore be used as a leading indicator of official manufacturing data. A somewhat similar measure – although this is not necessarily “atmospheric” is the nighttime luminosity of a country. Satellites measurements of the light output of a country at night may be a rough guide to how a country’s gross domestic product is trending.

Automobile Sales according to Satellites

Decades ago satellite imagery was only available to governments. But now ground images of a high resolution are available to the private sector at a reasonable cost. Additionally, with leaps and bounds in computing power the data from these images are crunched in algorithms to rapidly identify and classify objects of interest. For example, satellite imagery can be used to count the number of cars in auto dealers’ lots to get a sense of inventory, as explored in a recent report from Orbital Insight. Additionally, satellites can identify a factory site and with frequent imaging determine rising for falling shift work or output at the site.

Cargo Loads & Spectral Density

Certain satellites collect data across the electromagnetic spectrum. The human eye sees only one part of the spectrum, whereas satellites can record data on infrared and ultraviolet frequencies, for example. According to NASA, satellites trained on ports can measure the height of commodity stockpiles and also determine the type of commodity, which is then used to estimate changes in inventory across markets. These satellites may also be used to measure crop density and yield, further informing trends in commodity markets. This data may be combined with other oceanographic and atmospheric data to develop a deeper understanding of agricultural commodity trends in a particular area.

 

Figure 1. Economic Data via Satellite

Source: Lord Abbett. For illustrative purposes only.

 

As previously discussed, we think alternative data plays an important role in comprehensive economic analysis, and will continue to do so as real-time information becomes more readily available and thus more easily consumed and applied.

 

Forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.

This article may contain assumptions that are “forward-looking statements,” which are based on certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different from those described here.

The information provided herein is not directed at any investor or category of investors and is provided solely as general information about our products and services and to otherwise provide general investment education. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as Lord, Abbett & Co LLC (and its affiliates, “Lord Abbett”) is not undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement investor, contact your financial advisor or other non-Lord Abbett fiduciary about whether any given investment idea, strategy, product, or service described herein may be appropriate for your circumstances.

The opinions in the preceding commentary are as of the date of publication and are subject to change. Additionally, the opinions may not represent the opinions of the firm as a whole. The document is not intended for use as forecast, research or investment advice concerning any particular investment or the markets in general, and it is not intended to be legal advice or tax advice. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy and completeness of the information.

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