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Written by: Jeffrey O. Herzog, Ph.D. | Lord Abbett
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.
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.