Lights seen from space can help gauge export demand

beijing — Tracking nighttime light data by satellite can help economists improve forecasts for exports, especially for developing nations, Federal Reserve Bank of Kansas City researchers said.

Lights viewed from space offer unique data on nearly every place on Earth, such as luminosity values that can be used to create indexes for cities, regions, or countries over time, researchers Jun Nie and Amy Oksol write in a paper released by the bank this week.

They found a statistically significant association between lights growth and US export growth. Monthly lights data offer significant advantages over quarterly gross domestic product readings in forecasting US exports, they said, adding that getting more frequent measurements — such as every day — could help further refine shipment projections.

“Although GDP growth is often used to approximate foreign demand, nighttime lights data from satellite images offer forecasters an attractive alternative,” the researchers wrote. “In particular, nighttime lights data are released more frequently and closer to real time than GDP data and are less likely to be mismeasured.”

The study is the latest example of economists and investors turning to space to better track activity around the planet below. The World Bank has worked with Silicon Valley’s Orbital Insight to study poverty in Sri Lanka, while BlackRock says images from space can help understand how Chinese

Although GDP growth is often used to approximate foreign demand, nighttime lights data from satellite images offer forecasters an attractive alternative Jun Nie and Amy Oksol, Federal Reserve Bank of Kansas City researchers

companies are performing. SpaceKnow publishes proxies of economic activity across dozens of African nations based on nighttime lights.

Because exports rely on foreign demand, which is hard to measure, economists often use economic growth to approximate overseas appetite. That’s problematic because GDP data lag by a quarter or two in most countries, and the quality of foreign GDP data varies, said Nie, a senior economist, and Oksol, a research associate.

Nighttime light data may address both of those issues and help better project exports, the researchers wrote, citing the correlation between light levels and incomes. “Satellite data are likely more reliable than countries’ published measures,” they said.

The researchers said they used publicly available lights data from the US National Oceanic and Atmospheric Administration, which images the entire planet at night, then used the images, with pixels about the size of a square kilometer, to build a numerical lights index. — Bloomberg