Alternative data for macroeconomic indicators (Part 1/2)
In the first of a two-part series, we provide our take on the state of the alternative data industry from a macro perspective. Via three crude examples concerning Brexit, Sub-Saharan Africa and China, we also flag the basics of how alternative data can often trump conventional methods in order to obtain more timely and accurate investment intelligence.
Alternative data for macro is already here
In December 2008, The National Bureau of Economic Research announced that the US economy had entered a recession a year earlier. Although many economists suspected as much from the monthly and quarterly figures, slow moving statistics did not adequately capture the pace of slowdown – ultimately leading to delayed and meager policy response.
Since this time, the trail of digital exhaust continues to grow at an exponential rate, with some data points capturing a near-real time picture of economic activity. Alternative data is already providing policy makers and investment managers more timely, and, on many occasions, more accurate economic signals.
Crude example #1 – Brexit
When the UK voted to leave the EU in 2016, many economists and financial institutions forecasted the likelihood of recession shortly after. However, those leveraging alternative data for near real-time economic insights found that UK spending patterns