Thursday, December 3, 2009

The Good, The Bad, and The Beautiful - Unusual Economic Indicators

There is still much uncertainty about where the economy is headed in 2010. The GDP forecasts for Q1, 2010 from the latest Wall Street Journal Economic Panel range from -2.0% to +5.0%. The average of all respondents is +2.8% and the average of my personal “Super Seven” economists is +2.6%. Because there is so much uncertainty from the top economists analyzing the traditional economic indicators, it is a good time to look at some unusual ones.

The Strange Indicators:

Men’s Underwear

The theory is that men will delay underwear purchases in tough financial times. Mintel (a consumer research group) is forecasting sales to decrease 2.3% this year and fall another 0.5% next year. Reportedly, sales have increased since the summer.

My Read: This indicator was first proposed by in the 1970’s when men’s underwear choices were very limited. I think it is difficult to use the general data as a predictor today. There might be something useful here, but more in depth data analysis is needed.

Men’s Ties

The theory is that business people wear bright colors when they have confidence in economic conditions and positive attitudes. One economist has claimed that more men are now wearing pink and fuchsia neckties, after wearing much more muted tones earlier in the year.

My read: This one is difficult to measure. Although there could be data available if tie vendors track sales by color. Watch the business news and draw your own conclusions.

Women’s Lipstick

The theory is that during recessions women will compensate for reduced spending on clothes and other fashion items by buying more lipstick, an inexpensive alternative. This theory was first proposed during the previous recession during which lipstick sales spiked. However, it is not holding up this time. Lipstick sales are down about 11% this year. Makeup sales however are up 8.5%.

My read: The lipstick “index” has been proven unreliable so forget it. However the makeup sales could be relevant. Are women making fewer trips to the spa? Are they attempting to cover up the results of stress?

The Hot Waitress Index

The theory is that as layoffs increase, attractive women will have to take jobs as waitresses to make ends meet. I am not making this one up and the linked article makes a good case for the index relating to conditions in New York City. See article.

My read: This theory sounds like it was developed by a group of guys at a bar late at night. There is no baseline and it is difficult to measure. Again, you will have to be the judge on this one.

Unusual, But Logical, Indicators:

The Cardboard Box Index

Many things get shipped in boxes so production of boxes should increase before production of the goods that go into the boxes. Box production jumped in April and the recession probably ended in July. Sales have been relatively flat since however.

My read: Indicator is only good for certain industries and is more short-term in nature. Not showing much of a trend right now, but should grow in 2010.

The Baltic Dry Index

The index measures sea freight rates which typically are very sensitive to changes in demand due to the long lead times of ship construction. This index surged earlier in the year, but that was caused by activity in China. It then fell back, but it has shown strong growth so far in Q4.

My read: Positive movement, but watch China factor.

Scrap Metal Prices

The theory is that increased prices of scrap metal precede increased economic activity. Scrap aluminum and copper prices are up, nickel prices are down. Scrap steel prices are showing modest recovery.

My read: Good indicator, positive trend.

Coal Futures Prices

Coal is a source of energy connected to industrial production. The expected future price of coal should be related to the future demand for coal and thus give indications of economic direction. The index has been less reliable recently due to Chinese demand. Future prices are trending up, but not consistently.

My read: Not as reliable as in the past, but trending positive.

Indicators I See:

Sunday Morning Breakfast Index

I note the number of cars in the parking lot at a family restaurant I pass every Sunday morning. When the economy was strong, the lot was jammed. Early this year, the lot was less than half-full. There was an increase in the summer, but then it flattened out. However, there has been a slow, but steady increase the last two months.

Optional Medical Tests

A source in this industry told me business was very slow in Q1, but has improved every quarter.

The Christmas Lights Index

There are fewer and less extravagant Christmas light displays in my neighborhood this year. Is it because people need to reduce their electric bills or are they feeling less festive?

The Human Relations Job Postings Index

My fellow job seeking friends have reported a recent increase in job postings for HR positions. Speculation is that companies need to bolster their HR departments before hiring other positions.


Considering the 12 indicators as a group: seven are positive, three are negative and two are neutral. Somewhere between 2-3% GDP for Q1 sounds about right.

1 comment:

  1. What a great post. Always nice to have something funny and refreshing. I shared it with the twitterverse @bcgcompany and linked it back to your post, I have seen a few retweets since then. Keep up the good work.