Analysts need good and current data to inform clients and opine on industry trends, but what to do when a government slowdown has the potential to disrupt the steady flow of data from the Federal Reserve Bank, Bureau of Economic Analysis and the like?
It may seem insensitive when you consider 800,000 federal employees are on leave or working without pay, yet you still need access to data. But, when news sources like CNN predict the longest shutdown in US history has more miles ahead, it is time to think about alternative sources to bridge the information abyss.
The last thing an analyst wants to do is to give a client a blank stare when asked if revolving debt will increase or decrease. On the same vein, not having a sense of whether delinquencies are on the upswing or downswing will make you sound like a freshly-minted-MBA graduate with all the right credentials and no business experience.
This interesting read from Bloomberg today talks about some workarounds with Google Trends internet search data. A search on “increase in unemployment” show shows upward movement since December 23.
- Alternative economic data collected from new technologies such as Google Trends can offer visibility into the activity that traditional measures miss, and with a shorter lag, especially for areas where information is scarce or unreliable, according to JPMorgan Chase & Co.
- But there are also big challenges such as short histories, collection systems that are prone to change and inconsistent samplings of the population, according to a report Wednesday from economists Jesse Edgerton and Dan Weitzenfeld. For example, they find some Google Trends Internet-search data correlate strongly with U.S. retail sales, but more so for longer-term data than seasonally-adjusted monthly measures Wall Street forecasters often watch.
We’re not talking about off-the-wall metrics like cell phone usage, or projections on the long implications of late-night internet purchasing on a person’s character, but rather drawing conclusions from practical data points to bridge the potential information gap caused by displaced government analytic sources.
- “Despite these challenges, we still think there can be substantial benefits from using alternative data,” the analysts wrote. “The benefits are likely to be clearest in emerging or other economies that have fewer available data than the U.S., and for answering more granular questions about specific firms, industries, demographic groups or geographic regions.”
- The study is the latest in the long debate among economists and investors about the value of new sources of near-instantaneous data about consumers and economic activity. While real-time data from mobile phone locations, online job ads, real estate listings and satellite images can look tantalizing to investors looking for an edge, government reports and business surveys remain the bedrock for following the economy — even if they’re slower.
The Bloomberg article points to one of my favorite private sources, the JPMorgan Chase Institute, an independent economic research unit funded by Chase. Here is a great, current read, sure to satisfy the data gap. You will see insights drawn from Chase credit card transaction data, which as the largest US credit card issuer, should be considered a leading indicator. Other data cuts include income and social demographics.
So as the politics of the wall continue to displace workers, and potentially disrupt the steady flow of data, know that there are other sources to bridge the information gap and PJ is certainly at the top of the list.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group