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New Alternative Data Reveals Signs of Optimism Returning

While the COVID-19 pandemic has substantially shaken the global economy, alternative data collected by @Quandl shows signs of optimism returning.

While the COVID-19 pandemic has substantially shaken the global economy, new alternative data collected by Quandl shows signs of optimism returning.

Nasdaq’s Quandl, a leading alternative data provider, recently analyzed the five categories of data that provide the best macro overview of the economy and its likely trajectory: supply chains, small business performance, employment, consumption and credit.

“The COVID pandemic has affected the economy in many ways,” said Abraham Thomas, chief data officer and co-founder of Quandl. “And the speed at which things are happening is unprecedented.”

The data “documents really fundamental things like employment and consumption, which are two sides of the same coin,” Thomas continued. “So much of the economy is driven by small businesses. If they fail, a lot of people get laid off, or people stop consuming. What then happens to credit? Credit is the channel that magnifies all these other effects. And finally, the supply chain is what links everything together.”

While the markets have come off their March lows, Thomas said three questions remain top of mind for investors: How deep is the downturn that we’re in right now? When will it turn, or has it already turned? And, will the trajectory of the recovery be rapid or slow when it finally comes?

“If you want to zoom out and figure out what are the macroeconomic impacts, you have to look at much wider types of data, and that’s what prompted those specific categories of data,” said Thomas.

Still, Thomas acknowledged that this is a rapidly developing crisis. “Two months from now, I may be looking at something very different, but right now, this is where the attention is.”

Supply Chain

“Supply chains are interesting because they’re very dynamic, but they’re also very sensitive to disruption of the economy,” said Thomas. “The economy is so interconnected, that you could have a failure 20 links away in the chain, but it will have ripple effects and ramifications that we can expect widely. That’s why a supply chain is critical to watch.”

As travel restrictions and lockdown measures were implemented as the virus spread, first in China and then across the world, there was a concern that supply chains would be disrupted. Some companies reacted quickly, shoring up their suppliers and acquiring materials in advance.

Yet, some industries have vulnerable supply chains, such as food processing and meatpacking. Thomas said he is watching those supply chains closely because of the recent outbreaks in those facilities. He noted the chicken and pork prices have already increased, but wonders how much more they could rise and whether there could even be shortages.

More broadly, however, “the global supply chain has proved resilient – part of that is because consumption itself has dropped,” said Thomas.


“Discretionary spending, in general, is down, but people are spending on necessities,” Thomas said.

Grocery stores have been operating well above crisis levels. Thomas noticed that there is “an interesting curve shape” in the grocery store data that showed a huge spike in late March when everybody was stocking up, but then fell. Still, Thomas noted that “it's still running possibly 20% higher than this time last year” as people continue to cook at home as opposed to dining out.

Beyond grocery stores, some retail sections are performing well, mainly areas that are helping people live their lives while staying at home during lockdowns.

“It’s almost a mirror image of the closure of small businesses and local services,” Thomas said. “People have to substitute those at home, so they’re buying barber scissors, dumbbells, resistance bands, and so on.”

Furthermore, as a substantial fraction of the labor force is working from home, those people are spending money on the tools and technology that they need, such as webcams, videoconferencing software, hardware, and infrastructure like Amazon Web Services.

Consumption, however, is also dependent on consumer confidence; when individuals feel safe and ready to reopen the economy. To get further insight into this, Thomas said Quandl has been examining online flight search trends.

“Historically, people tend to book their flights to vacation for two to three months before they go,” Thomas said. “Then COVID hit, and all of a sudden, people are not looking at three months in advance—they're looking at six or nine months in advance. So, that gives you a hint or an intuition as to when people expect the crisis to be over.”

Small Businesses & Employment

The lockdown restrictions also affected small businesses as they are “one of the most vulnerable areas of the economy because they often rely on foot traffic,” said Thomas, also noting that “they tend not to have the deep coffers of cash resources that big corporations have.”

As businesses were forced to adjust to the lockdowns and social distancing measures, the toll on employment was devastating. About 40 million Americans have filed for unemployment benefits since March 21, but the number of new people filing has begun to ease.

In the U.S., small businesses in New York and California were walloped as the coronavirus forced prolonged local lockdowns while they recovered more quickly in other states, like Texas and Arizona.

Quandl’s data shows that the business industries that suffered the most were personal care and beauty, bars and restaurants, entertainment and leisure. “Even in those categories, we’ve seen some amount of recovery,” said Thomas.

According to Thomas, data on payrolls, hours worked, closures, and revenues, transactions and credit card payments are also rebounding.

“To be clear, we’re talking about a trajectory that went from 100 to 50 or from 100 to 30, depending on the industry. Now, it’s back around 60 or 70, but it’s nowhere close to fully recovered,” Thomas said.


The data surrounding credit has been largely positive. Thomas noted that most companies are being more conservative with their cash.

“They're not paying as rapidly as they used to in the past. And I think this is prudent,” Thomas said. “By and large, we haven't yet seen default spike up”

“We’re not facing a liquidity crisis just yet,” Thomas continued. “Now, how much longer that will remain true? How much longer these government programs will last? How efficient will they continue to be in getting the money in the hands of people who need it? These are all questions that we'll be watching very carefully. But thus far, we haven't yet seen that degree of liquidity stress when it comes to individual consumers.”

Because developments surrounding the coronavirus occur so rapidly, Thomas said that this crisis only emphasizes the importance of data.

“You can’t wait for quarterly financials or government statistics that are published once every six months,” Thomas said. “You have to keep your fingers on the pulse of events almost on a daily basis.”


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