An unusual economic indicator that I track is “Outdoor
Christmas Lights” (OCLs). OCLs are a
coincidental economic indicator, providing
information about the current state of the economy. This indicator is only
relevant when the economy is getting weaker or growing stronger, and its
measurement is highly subjective – more observational than measurable. Also, it is only able to be observed for a few weeks
each year.
I believe OCL purchase/usage is a unique economic behavior
because it combines a variety of factors:
-
It is a purely discretionary purchase at a time
of the year when discretionary money is limited due to gift buying.
-
It involves an expense of time to purchase the
lights/decorations.
-
It involves an additional time investment to
install the lights. However, this investment may not be as extensive due the
increased use of the new projection lights.
-
It also requires an additional cost of
electricity to power the lights. Another discretionary expense.
-
People tend to display OCLs for self-enjoyment
and can be a reflection of their overall mood. A large number of people display
OCLs as part of their annual Christmas festivities, while a significant number
may be influenced by how festive they are
feeling in a given year.
-
The use also creates positive economic
externalities in that other people get to enjoy the OCLs. The huge displays
some people employ are done mainly for the external benefits they produce.
There is also a group dynamic in play within neighborhoods where everyone
receives benefits from everyone else’s displays.
Therefore, this is economic behavior that requires an
initial purchase, a physical investment, an ongoing economic investment done
for personal/family mood enhancement, with an external benefit to both
neighbors and strangers. This is a unique situation which has broader economic
indications.
My
Observation
I have lived in the same neighborhood for over 20 years and
have observed (not measured) OCL usage over this time period. I admit it is
only one extended neighborhood (five allotments),
but it is in Stark County, Ohio, a much-watched “bell-weather” county in
presidential elections.
During 2003-2007, OCL usage steadily
increased. In 2007, the economy was booming and OCL usage peaked. After
the recession hit, OCL displays plummeted for a few years. Then, like the
economy, they increased
gradually from 2012 to 2016. The displays in 2016 were
much more prominent than 2012, but still not up to 2007 levels.
Which brings us to 2017. What I just observed was an
unprecedented level of OCL usage. All
occupied houses on my street had displays, and
this is on a scarcely-traveled cul-de-sac. There
was a high percentage of participation in the other four neighborhoods as well.
What
It Means
The economy may be even stronger than what some of the
other indicators say. This also confirms the higher consumer
confidence/sentiment numbers released recently. Look for final Christmas retail
sales numbers to exceed the forecasts. People are feeling good about their
situation and the economy. There is economic momentum continuing into 2018.
