How Many Lights Are On? This Startup Thinks the Answer Is Directly Related to GDP Growth

December 14, 2016, 8:57 AM UTC
Undated NASA handout picture of North Korea (the dark area) and South Korea as seen from the International Space Station
North Korea (the dark area) and South Korea at night are seen in an undated NASA handout picture from the International Space Station. The clarity of the night image is possible thanks to the European Space Agency's NightPod, installed on the station in 2012, according to a NASA news release. It incorporates a motorized tripod that compensates for the station's speed of approximately 17,500 mph and the motion of the Earth below. REUTERS/ NASA/Handout via Reuters (OUTER SPACE - Tags: SCIENCE TECHNOLOGY) ATTENTION EDITORS - THIS PICTURE WAS PROVIDED BY A THIRD PARTY. REUTERS IS UNABLE TO INDEPENDENTLY VERIFY THE AUTHENTICITY, CONTENT, LOCATION OR DATE OF THIS IMAGE. THIS PICTURE IS DISTRIBUTED EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS. FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS - RTR42GHX
NASA / Reuters

It’s a simple question, but are a lot of people burning the midnight oil? That might be a good clue as to how healthy the economy of a given location is.

Bloomberg reports that Japanese financial research and technology firm Nowcast is examining and comparing changes in night-time illumination, as captured on satellite images, and generating predictions of changes in a country’s GDP from that information. It correlates the findings with statistics taken from industrial production and trade.

According to the company’s CEO Ryota Hayashi, early tests of the methodology in Japan have shown promising signs. Nowcast’s predictions were more accurate than surveys made by economists six weeks prior to the release of economic data.

Nowcast hopes its ability to accurately predict GDP well ahead of time will attract customers who otherwise would only have quarterly GDP data to rely on for their investment decisions. “Using three-month-old factors in your models is far from ideal,” Hayashi told Bloomberg.

The idea isn’t totally new. A group of economists in 2012 found that light intensity at night could be used to infer levels of economic activity, and could be particularly helpful if traditional forms of data were not reliable or available. But Hayashi told Bloomberg that Nowcast was the first service provider to use night-time illumination to project economic growth.

For more about economic forecasting, see Fortune’s video

The company aims to start providing light-driven growth forecasts for places like Japan, China, Taiwan, India and the U.S. as soon as next February.

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