Robin Wigglesworth in the Financial Times: “Imagine a world where interminable waits for backward-looking, frequently-revised economic data seem as archaically quaint as floppy disks, beepers and a civil internet. This fantasy realm may be closer than you think.
The Bureau of Economic Analysis will soon publish its preliminary estimate for US economic growth in the first three months of the year, finally catching up on its regular schedule after a government shutdown paralysed the agency. But other data are still delayed, and the final official result for US gross domestic product won’t be available until July. Along the way there are likely to be many tweaks.
Collecting timely and accurate data are a Herculean task, especially for an economy as vast and varied as the US’s. But last week’s World Bank-International Monetary Fund’s annual spring meetings offered some clues on a brighter, more digital future for economic data.
The IMF hosted a series of seminars and discussions exploring how the hot new world of Big Data could be harnessed to produce more timely economic figures — and improve economic forecasts. Jiaxiong Yao, an IMF official in its African department, explained how it could use satellites to measure the intensity of night-time lights, and derive a real-time gauge of economic health.
“If a country gets brighter over time, it is growing. If it is getting darker then it probably needs an IMF programme,” he noted. Further sessions explored how the IMF could use machine learning — a popular field of artificial intelligence — to improve its influential but often faulty economic forecasts; and real-time shipping data to map global trade flows.
Sophisticated hedge funds have been mining some of these new “alternative” data sets for some time, but statistical agencies, central banks and multinational organisations such as the IMF and the World Bank are also starting to embrace the potential.
The amount of digital data around the world is already unimaginably vast. As more of our social and economic activity migrates online, the quantity and quality is going to increase exponentially. The potential is mind-boggling. Setting aside the obvious and thorny privacy issues, it is likely to lead to a revolution in the world of economic statistics. …
Yet the biggest issues are not the weaknesses of these new data sets — all statistics have inherent flaws — but their nature and location.
Firstly, it depends on the lax regulatory and personal attitudes towards personal data continuing, and there are signs of a (healthy) backlash brewing.
Secondly, almost all of this alternative data is being generated and stored in the private sector, not by government bodies such as the Bureau of Economic Analysis, Eurostat or the UK’s Office for National Statistics.
Public bodies are generally too poorly funded to buy or clean all this data themselves, meaning hedge funds will benefit from better economic data than the broader public. We might, in fact, need legislation mandating that statistical agencies receive free access to any aggregated private sector data sets that might be useful to their work.
That would ensure that our economic officials and policymakers don’t fly blind in an increasingly illuminated world….(More)”.