Smoke and mirrors: New real time measure of global economic activity

French newspaper “Les Echos” has launched the Kayrros-EY Consulting recovery index, which allows weekly monitoring of activity industry in the main economic zones of the planet – China, the United States, the European Union and India.

Satellite data on fumes, temperatures or greenhouse gas emissions on industrial sites around the world are recorded every few days. These images, coupled with anonymous mobile data and radar recordings, give an almost real-time vision of the situation of a blast furnace or an oil tank, and therefore to assess, after some calculations, the degree activity of a site, country or sector. The index is weighted according to the importance of the business sectors and the weight of each country, and has a base of 6th January 2020.

By tracking the activity levels of heavy industry (steel, electricity production, oil and cement) in the selected areas to the nearest metre, the index allows investors to compare the situation almost in real time across different countries. 

The chart below shows that global activity across those 4 activities is down 30% since the start of the year. Worrying perhaps is that although the rebound in Chinese activity during April is clear, activity has since softened in tandem with the US and Europe. Indian activity has dropped off a cliff – down 50%!

The steel sector has been particularly badly hit. According to satellite data steel sector activity in these countries is down 40% since the start of the year with no sign at present of it bottoming out.

I’ve written before about the challenges in interpreting Chinese data alone. The incentives provided by the state make everything from traffic congestion to electricity generation very difficult to interpret. This new data source should give commodity traders a much more reliable source of real time activity across different major economies and industrial sectors.

Related article: Deciphering Chinese economic activity post-COVID-19

(Visited 330 times, 1 visits today)

By .

If you enjoy my work then please consider subscribing to my email updates and newsletter, and buying my books.

My latest book Pay Attention: 101 Ways To Tame The Narrative Machine, Be A Smarter Media Consumer And Stop Outsourcing Your Thinking is now available to buy. Listen to a sample of the Audible version

Check out my online course on Skillshare. 200+ students have watched everything you need to know about commodities in less than 60 minutes (link gives you 2 months free) Join - Skillshare

Materials Risk is a commodity intelligence and advisory firm. We provide financial market and economics related content, commodity market training, strategic advice and economics consulting. For more information see 'Services'.