The world economy has changed considerably since the coronavirus pandemic started. The magnitude and speed of collapse in activity across the globe was unlike anything we had experienced in our lifetimes. Governments and policymakers responded with massive fiscal and monetary stimulus, several times larger than the steps taken during the Global Financial Crisis.
How will the world economy respond in the days, months, and years to come? The IMF estimates that cumulative output loss from the pandemic in 2020 and 2021 will be 9 trillion dollars. Although some recent data points have shown signs of a strong recovery, the future is highly uncertain. Not surprisingly, the divergence in macroeconomic forecasts has widened considerably. In early February, the spread among economic growth forecasts for Q2 in the U.S. was 3.5 percentage points according to FocusEconomics data. By April 29, that spread had widened to 56.8 percentage points.
How do we assess the impact of a worldwide recession and subsequent radical fiscal policy? How will consumers behave as lockdowns end around the world? Can supply chains adjust to the sudden drop in world trade? Theory isn’t particularly helpful for those who need to forecast growth; we need coincident indicators of economic activity that give us early clues to answer some of these questions.
Wuhan Industrial Zone
Data from space can provide near real-time answers to the questions forecasters are asking. For example, the graph above is from Wuhan, China, where the pandemic began. Note how activity increases for the holiday season, then drops off as coronavirus impacts the area. As the lockdown is lifted, there is an initial surge, followed by sustained high levels of activity in the first week of June.
At SpaceKnow, we have been producing independent near real-time indicators of economic activity since our inception in 2014. We extract and aggregate changes from satellite images with the help of machine learning, advanced statistics, and industry expertise.
To break it down, we monitor tens of thousands of locations globally using a variety of space-based sensors. Our cutting-edge artificial intelligence technology analyzes billions of pixels to detect changes at these locations. We focus on detecting changes related to output, product movement, construction, factories, oil wells, ports, mines, and more.
Creating activity indicators from this massive database is not an easy task. The quality of satellite imagery is dependent on environmental and imaging conditions. Different satellites have different sensors (optical, multispectral, SAR), revisit rates, and orbital patterns. Our intellectual property is the ability to process all this information and translate it into indices. The process requires close collaboration between our team of data annotators, scientists, data scientists, and economists. Over the past 6 years, via experience and experimentation, we and our machines have learned and improved substantially.
As a result, we are proud to announce the launch of SpaceKnow Nowcasting Solutions (SKNOW), an independent, near real-time product suite that tracks economic activity across a range of countries and industries. Our first release will include the following new products:
SpaceKnow China Satellite Manufacturing Index (CN SMI)
SpaceKnow US Satellite Manufacturing Index (US SMI)
SpaceKnow Germany Satellite Manufacturing Index (DE SMI)
SpaceKnow UK Satellite Manufacturing Index (UK SMI)
In the coming months, SpaceKnow will be publishing many more indices. As we continue our research, we will build indicators that zoom in on sub-sectors, sectors, regions, and/or countries. Our goal is to sift through the data to bring you what’s important, chosen by powerful algorithms without sentiment or bias.