Real-time estimation of private construction activity using alternative data

Abstract

In recent years, there has been a growing trend to utilize non-traditional alternative data in addition to traditional statistical data to evaluate real-time economic conditions. In this paper, we developed a method for estimating the private construction activity in Japan by utilizing information such as construction period and total floor area posted on Notice Signboards of Construction Plan that are placed at construction sites in advance of the construction of mediumand high-rise buildings. We have estimated the private construction activity index from 2016 to 2023 and confirmed that the index shows similar movements to the Indices of Construction Industry Activity previously created by the Ministry of Economy, Trade and Industry (METI) until July 2020. These results suggest that (1) the index presented in this paper could be a useful monthly indicator of construction activity, as it generally accurately captures seasonality and depicts the impact of COVID-19 pandemic as well as the recent downturn in construction activity, and (2) given that signboards are placed before application for building confirmation, the index could be capable of capturing the private construction activity in real time.