Recession in real time: how big data can track the Covid slump

This week it will be confirmed that Britain’s economy is in the deepest recession for at least a century. Yet only a few days ago, the Bank of England heralded a return to growth, forecasting a more rapid recovery than previously feared.

Official growth figures due to be published on Wednesday by the Office for National Statistics are expected to show a 21% plunge in gross domestic product (GDP) in the three months to June. After GDP slumped by 2.2% in the first quarter, this will confirm two consecutive quarters of falling output – the technical definition of a recession.

But long before the official economic data becomes available, early snapshots of activity have been being examined by the Bank to determine the state of the economy right now, rather than a few weeks ago – with a vast array of unusual information at its disposal, ranging from internet searches to road traffic patterns, restaurant bookings and cinema ticket sales.

For the first time in millennia of economic events, the coronavirus pandemic could prove the first big-data recession – trackable in real time. “It’s unique in many respects,” says Ruth Gregory, UK economist at consultancy Capital Economics. “In previous recoveries we didn’t have as much real-time information, so that has been a useful early indicator of where we’re heading.”

That is not to say that scouring unusual data sources is entirely new. For centuries, traders have monitored ships arriving at ports to gain an edge on their rivals, and counted cranes over cities or taxis outside City banks and law firms.

The former US Federal Reserve chairman Alan Greenspan speculated that economic downturns could be measured by men’s underwear – suggesting that sales of boxer shorts and briefs fell when times were tough.

Economists have drawn up the “leading lipstick indicator” to illustrate how sales of small luxuries increase when a downturn looms, while demand for haircuts falls and discount food and drink sales soar.

During the early-1990s recession, the Conservative chancellor, Norman Lamont, was faced with troubling economic news as the government prepared for the 1992 general election. The official figures still showed Britain was stuck in a deep recession, unemployment was rising and there were record numbers of bankruptcies and house repossessions.

But Lamont picked on surveys of business confidence, retail sales and a rising use of banknotes and coins in the economy to famously declare that the “green shoots of economic spring” were rising.

This time around, however, the unique nature of the shock inflicted by Covid has pushed analysts to examine swaths of so-called rapid indicators. Never before have transport usage and social interactions been brought to such a rapid halt – leading to a new school of economic analysis. Here are some of the data sets being examined:

Internet searches

Billions of search requests are plugged into Google, Bing and other search engines each day, building a reasonable picture of humanity’s wants and needs. Assuming they could provide a hint of spending patterns, the Bank’s analysts pored over trillions of bytes of data to work out which way the economic winds might blow in the pandemic.

Google searches for social activities watched by Threadneedle Street have started to rise again as lockdown measures are rolled back, indicating that social spending – in pubs, bars, hotels and restaurants – could be bouncing back.

The Bank highlighted that search terms for the six top-selling car brands have returned to pre-pandemic levels. The figures match a rapid recovery in car registrations compiled by the Society of Motor Manufacturers and Traders (SMMT), which revealed a dramatic 11% annual increase in car sales last month.

EU researchers have tracked searches on and Airbnb falling to a three-year low in the midst of the outbreak, and slumping searches for air travel, as well as soaring queries about unemployment benefits.

In the US, such searches remain 25% below levels seen a year ago, but have recovered faster in countries where the virus has been better contained, such as Germany. Hotel booking searches are starting to rise again in Britain, but requests for cinema and theatre ticket details remain depressed.

Restaurant bookings

The launch of the government’s “eat out to help out” discount scheme last week fuelled a boom in people returning to restaurants across the country. According to data from OpenTable – an online restaurant booking platform monitored by economists – the number of seated diners in Britain making online, phone and walk-in reservations leapt by 10% on Monday compared with the same day a year earlier, in the first annual increase since before the pandemic. Numbers continued to rise on Tuesday and Wednesday.

Elsewhere, diner numbers are rising in Germany and Ireland, but remain dramatically down in the US, Canada, Mexico and Australia.

Road traffic

As lockdown restrictions have been relaxed, drivers have steadily returned to Britain’s roads. Journey numbers captured by requests for directions on Apple Maps have raced above pre-pandemic levels, while weekend car use has also return to normal, according to Department for Transport data.

However, with the continuing risks to health from Covid-19, public transport usage remains below usual levels. Journeys on the London Underground are still down by almost three-quarters. Cycling has, however, rocketed.

Economists study rail journeys, the numbers of trucks near ports (to gauge imports and exports) and passenger arrivals at airports. But while car journeys can serve as a bellwether for economic activity if people are leaving home to purchase goods and services, more trips won’t always correlate with more spending activity – especially when internet shopping and home working are on the rise.

“The world and his dog are tracking the Google and Apple mobility data. These are unquestionably giving us new information and insight, but we’ve got to be careful not to misread the signals,” says Dean Turner, UK economist at the Swiss bank UBS.

Credit card spending

After the reopening of non-essential shops, official figures show retail sales in the UK have returned close to pre-pandemic levels. But with a regular drumbeat of shop-closure announcements and job cuts by major high street retailers, this clearly isn’t the full story.

For a wider picture of household spending – beyond goods bought in shops and online – credit card data compiled by Visa and Barclaycard offers a clearer picture. The data includes spending on services such as theatre tickets, theme parks and travel, as well as money splashed on meals out.

The latest figures for June show consumer spending remained 14.5% down on a year earlier – although this was an improvement from a sharper decline of 27.7% in May. Online grocery shopping was up 105.9%, but spending on eating and drinking declined by 56.4%.

Retail footfall

A walk through most big city centres is all that’s needed to confirm that Britain’s economy remains mired in the pandemic. But footfall figures from retail and leisure hotspots, compiled from iPhone and Android data and by research providers such as Springboard, also reflect the desolation of urban centres.

Footfall figures compiled by Springboard show a gradual improvement, but with office workers still mainly working from home, and, with a lack of tourists coming to Britain, overall visits to retail destinations were still down by 39.4% last month compared with a year ago. In central London – more reliant than anywhere else in the UK on tourists and office workers – visitor numbers were 69% lower.

Energy usage

At the onset of the pandemic, figures from China showed a dramatic plunge in energy consumption, as factories halted production to stop the spread of Covid.

With energy demand collapsing as the outbreak spread, US oil prices plunged below zero for the first time in history – meaning producers were having to pay buyers to take it off their hands.

The global oil price slumped but has recovered as lockdown measures were lifted, yet still remains about a quarter below its February peak of almost $60 a barrel.

Electricity demand in Britain slumped during April and May but has started to rise closer to the levels recorded a year ago.

Pollution data

As road traffic fell with business and social activity on hold, air quality improved. Satellite images from around the world revealed how normally polluted cities were able to breathe again. In London, levels of harmful nitrogen dioxide (NO2) at some of London’s busiest roads fell by half. Air pollution is rising as cars and trucks return, but remains below previous levels.

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