Startup to Forecast GDP Using Satellite Images of Night Lights

Nowcast, a Japanese financial research and technology startup, has developed a product that estimates economic growth in real time by using satellite images of night-time lights, according to Bloomberg. Based on algorithms that examine changes in the intensity of illumination, as well as a range of published statistics including industrial production and trade, the company can accurately forecast changes in gross domestic product, Chief Executive Officer Ryota Hayashi said in an interview.

Nowcast, which already provides real-time inflation data, is aiming to start publishing forecasts for economies including Japan, the U.S., China, India and Taiwan when the product is released as soon as February, according to Hayashi. The financial-technology firm is seeking to sell the service to investors who rely on official GDP figures that are released weeks after the end of each quarter.

Internal testing of the system’s accuracy shows an average deviance of 0.36 percentage point two weeks before the release of Japan’s official statistics and 0.39 percentage point six weeks ahead, Hayashi said. That’s in line with an average 0.33 percentage-point deviation in surveys conducted by the Japan Center for Economic Research two weeks before the official release, and beats its deviance of 0.48 percentage point at six weeks.

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