On Sept. 11, 2001, one of the largest terrorist attacks in the country's history hit the United States. For many in Canada and the U.S., the world seemed to stand still.
"I remember people were stunned. They were glued to the TV to try to find out what was going on," says John W. Galbraith, an economics professor at McGill University.
But what didn't stop -- at least not for long -- was consumer spending. Economy activity in Canada rebounded "surprisingly" quickly, according to a new paper from CIRANO, a Montreal-based think tank.
Mr. Galbraith and Greg Tkacz, an economist at St. Francis Xavier University and formerly of the Bank of Canada, analyzed debit card and cheque payments during three extreme events: the Sept. 11 attacks, the 2003 blackout in Ontario and several U.S. states, and the SARS epidemic centred around Toronto in 2003.
In each case, the economists found a slight blip in the number of transactions at the time of the events, but activity returned to business-as-usual within days.
"There was some effect, but hardly what I'd consider dramatic," Mr. Galbraith says. "I would have expected you would see quite a substantial fall for at least a little while."
For Sept. 11, the value of transactions was virtually unchanged, while the volume ticked down immediately after the attacks and returned to normal within a few weeks. The 2003 blackout showed a similar pattern that recovered even more quickly.
During the SARS epidemic in the spring of 2003, many feared public places in case they might catch the severe respiratory virus. But a look at the debit-card data shows the same peaks and troughs driven every spring by the Easter holidays. The numbers from 2003 sit right in the pack of the neighbouring years.
This paper was part of longer research Mr. Galbraith and Mr. Tkacz are conducting to try to make economic forecasting more precise.
Current estimates of GDP or inflation come out only monthly or quarterly, sometimes after delays and revisions. Mr. Galbraith says they hope their measure of consumer spending can be another tool added to the mix to deliver daily or weekly estimates, in something closer to real-time.
"One of the problems one has in economic management is that we don't in general know where the economy is right now," Mr. Galbraith says.
And without knowing where the economy is in the present, it's much more difficult to predict where it will be in one quarter or one year.
There are some drawbacks to measures based on debit transactions. In the case of the 2003 blackout, part of the drop can be attributed to the blackout itself -- many stores in the affected regions were closed and debit machines were inoperable without power.
Debit card use accounts for about 20 per cent of all purchases, Mr. Galbraith estimates, but that leaves a lot of expenditures from cash or credit. Credit cards are trickier to track, as many purchases aren't recorded on the date the cards are used.
In the case of Canada, too, all transactions are run through Interac. The company provided data to Mr. Galbraith and Mr. Tkacz for academic purposes, but the information isn't yet available to the public.
Still, the authors hope the tool they are developing will be of some use to governments trying to figure out what to do in uncertain times.
"With payment systems data, policymakers may be able to gauge the severity of unusual extreme events in a more timely manner, and may derive guidance as to measures required to dampen the impacts of negative events," the paper says.