After examining what has happened to power demand in Northern Italy, which some say is about 11 days ahead of the U.S. trajectory of COVID-19, University of Chicago (UChicago) economist Steve Cicala found that power demand has plunged in Northern Italy since the middle of February.

On Feb. 21, life in the region was largely normal. The following day, the Italian government began to institute quarantine measures. By Feb. 24, power demand began to slow. There was a bump in power just before the government instituted a national lockdown about two weeks later on March 10. About a week after that, power demand had fallen 18 percent compared to demand just prior to the quarantine measures.

Power demand could be a real-time indicator of the more widespread impacts on the Italian economy, said Cicala in a news release posted on UChicago's website on Thursday. What is happening in Italy could point to what the United States could expect in the coming weeks as states issue tighter restrictions on daily life.

"If paychecks and employment follow what is happening in the electricity-demand data, then there are a lot of people who will need help," said Cicala, an expert on the economics of environmental and energy policy regulation.

When there is a sharp shock in the economy, other indicators like employment may lag in reflecting the impact, because companies often lay off workers as a last resort, after they have already taken other measures like ramping down production or adjusting maintenance schedules, he explained. Conversely, electricity demand shows the more immediate change and is a broad measure of economic activity.

As policymakers consider which countermeasures may be necessary to buffer the economic effects of coronavirus, a real-time indicator of the economy's strength is of the utmost importance.

Related

Go to Forum >>0 Comment(s)