Nowcasting Global Economic Activity Post COVID
What Does Pollution Data Say About the Global Industrial Recovery?
August 6, 2020 – Industrial production (IP) and manufacturing output have collapsed during the COVID-19 pandemic across the globe as a result of state-imposed lockdowns. As countries start to emerge from these lockdowns, the ability to gauge where we are in a recovery is important. Because economic data has a two to three month lag, the search is on for anecdotal evidence that can give us real time indicators.
As already demonstrated in our previous paper focusing on European manufacturing, pollution data can serve as a useful and timely gauge for industrial production and manufacturing output. Analysis using city-level pollution data shows that industrial production globally — while having rebounded from lows — has not yet recovered from the lockdown-induced collapse.
In the U.S., industrial production rebounded from the April lows, but the recovery has been slow with our model suggesting IP growth in July -9% year-over-year. Canada has similarly rebounded but could see July IP numbers still 10% below 2019 levels.
China rebounded from its lows and saw positive year-over-year growth in April-June, but pollution data suggests growth has moderated in July to near-flat. Regionally, we expect South Korea to rebound to positive growth in July, India to rebound but still be significantly below its 2019 levels with a similarly tepid rebound in Japan.
In Latin America, data indicates a slow rebound could be seen in Brazil but Chile continues to decline.
Authors: Igor Cesarec,