To determine the economic impact of the big storms that hit the U.S. in 2017, the Federal Reserve turned to First Data Corp.’s swipe information for answers. With the data, they were able to get information in real time that would have otherwise taken weeks, Bloomberg reported.
For example, sales at restaurants and stores in the Florida cities of Tampa and Miami had fallen to extremely low levels. And in Houston, spending tumbled by 75 percent from typical amounts. With this kind of information, the Fed was able to help determine how the big storms would impact economic growth in the third quarter of 2017.
This kind of information is important as central bankers are slowly increasing the cost of borrowing to help the economy. Yet bankers don't always have firm estimates on the best interest rate for the economy. With earlier access to data, however, central bankers can gain early feedback on their interest rate policies to determine, for example, if they are too strict or too loose.
Hurricane Harvey, for instance, had a notable impact on retail sales and industrial output. According to Reuters, the hurricane — which hit Texas in the last week of August — disrupted activity and was predicted to damage economic growth in the third quarter of 2017.
“The early returns from Harvey are trickling in, and the news is not good,” Joel Naroff, chief economist at Naroff Economic Advisors, said in September of last year. “Economists are likely marking down third-quarter growth and marking up the fourth quarter.”
Hurricane Irma, which struck Florida in September, was also predicted to have a negative effect on the economy, but analysts expected a rebound in the fourth quarter.
According to the Commerce Department, retail sales dropped 0.2 percent in August, the biggest decline in six months at the time. Motor vehicle sales tumbled 1.6 percent, and U.S. retail sales of building materials, electronics, appliances and clothing also fell.