Bank of Israel forecasting gets real during pandemic
JERUSALEM (Reuters) – Swiped a credit card? Turned on the lights? Driven to work or the supermarket? Israel’s central bank has been watching.
With traditional indicators like inflation and unemployment arriving too late or unreliable due to COVID-19 disruptions and lockdowns, the Bank of Israel has turned to real-time data including cellphone tracking and electricity usage to make quick calls on the pandemic-hit economy.
In normal times such information is too short-sighted to be helpful. But with things developing rapidly, it has given critical insight into people’s habits, said Deputy Governor Andrew Abir.
“It was the only thing we did have that we could trust,” Abir told Reuters. “Other data we couldn’t trust or we were getting data from February-March. If you are in May what does February-March data help you?”
“The problem for central banks and other economic decision makers is all the normal data that you get is just too much in delay, or even worse, the actual collection of the data has been completely disturbed,” he said.
Like many central banks, the Bank of Israel cut its benchmark interest rate and launched a bond buying scheme when government restrictions to combat the coronavirus outbreak forced many businesses to close and sent unemployment and debt yields soaring. It has not ruled out taking more measures to help the economy recover from a forecasted 4.5% contraction this year.
European authorities who have long used some real-time data sources to complement regular indicators are increasing their reliance as well. The Irish central bank said in April it was developing a number of rapid indicators like card spending while French government forecasters turned to bank card data and electricity usage as part of what they call a “nowcasting model.”
Abir said the central bank was analyzing data provided by Apple (AAPL.O) and Google (GOOGL.O) showing people’s movement via their mobile phones. Both companies made the information public, while keeping individual identities private, to help authorities better respond to the global health crisis. Mobility data, Abir said, “tells us every day exactly what people were doing”. When traffic returned to commercial hubs, for example, it signaled many furloughs were coming to an end.
The bank also tracked a 13% dip in workday electricity consumption in April, when it cut interest rates, and saw a slight recovery in May, when it held them steady. Credit card use showed in real-time people spending big sums in supermarkets and pharmacies while restaurants and tourism suffered.