Israeli central bank forecasting gets real during
pandemic
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[June 23, 2020] By
Steven Scheer and Ari Rabinovitch
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 forecast 4.5% contraction
this year.
"NOWCASTING"
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”.
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The Bank of Israel building is seen in Jerusalem June 16, 2020.
REUTERS/Ronen Zvulun
Abir said the central bank was analysing 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 signalled 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.
Abir noted that the data, though volatile, currently shows spending is around
90% of normal.
"It's giving us an idea that, yes, people are getting back to normal life, but
it's not complete," he said.
Israel was one of the first countries to close its borders and impose nationwide
restrictions. It has reported 307 COVID-19 deaths, much less than many developed
countries.
Daily infections dropped to single digits last month, but the rate has increased
since restrictions were eased, something Abir said he would be watching closely.
The bank is also pushing lenders for more timely information on how much credit
is being injected into the economy.
(Editing by Emelia Sithole-Matarise)
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