The Strategist

Seven bizarre economic indicators


03/02/2018 - 11:14



Can the number of pregnant women, the length of skirts, men's underwear and the height of skyscrapers predict a recession?



bulbfish  via pexels
bulbfish via pexels
Number of pregnancies

The decrease in the number of pregnancies is a sure sign of the approaching recession in the economy, the National Bureau of Economic Research of the USA (NBER) has revealed. The number of conceptions began to decline at least six months before the beginning of the last three recessions in the US - in the early 1990s, early 2000s, and the late 2000s. "One explanation may be that people’s decision to have a child often reflects their confidence in the future," says one of the authors of the study. The drop in the number of pregnancies is a leading indicator and it can be used to predict recessions, NBER notes.

Length of skirts

One of the oldest non-traditional market indicators is the length of women's skirts. They become shorter during the growth of the stock market and the economy.  On the other hand, it is believed that skirts are usually longer during the recession. This index was suggested by the economist George Taylor, a professor at Wharton Business School: he noticed that short skirts became popular in the roaring twenties, and during the Great Depression women again switched to long ones. Taylor suggested that women sought to demonstrate expensive silk stockings in good economic times, and to cover their bare legs in the difficult times. But the length index of skirts badly correlated with the state of the economy and later, until the XXI century.

A  study of economists Erasmus School of Economics, held in 2010, showed that the correlation between the length of skirts and the stock market exists, but fashion trends may lag behind the market for three years.

The lipstick Index

In 2001, Estée Lauder Chairman Leonard Lauder proposed a lipstick index: he argued that there is an inverse correlation between sales of the product and the state of the economy. In the autumn of 2001, during the recession and after the September 11 attacks, lipstick sales grew 11% in the US. It is known that sales of cosmetics were quickly climbing up even during the Great Depression. One of the explanations is that lipstick can be a less expensive alternative to expensive purchases, as women try to save money in an uncertain financial situation. However, studies have shown that there is no clear correlation between lipstick sales and the economic situation - they can grow during the economic boom, too.

Men's underwear

The use of consumer goods as indicators of the state of the economy is associated with an assessment of the psychology of buyers and the level of consumer confidence. The former chairman of the US Federal Reserve, Alan Greenspan, noted that the sign of the beginning of the recession could be a decrease in demand for men's underwear, the purchase of which is postponed due to the onset of a difficult economic situation.

Height of heels 

Another fashion trend, which may be related to the economic situation, is the height of the heels of women's shoes. "Usually, during a recession, the height of the heels grows and keeps at this level. Consumers turn to a more catchy fashion as a means to fantasize and escape from reality," said IBM consumer product expert Trevor Davis in 2011, who analyzed posts in social networks and blogs. The trend is traced throughout the century: low-heeled shoes and flats were replaced by shoes with higher heels and platforms during the Great Depression and the oil crisis of the 1970s.

Index of skyscrapers

The Barclays skyline index regards a boom in the construction of towers as a sign of the impending recession in the economy. And the more skyscrapers are built, the longer the recession will be. Before the Great Depression, three mega-buildings were built in the US: the Empire State Building, the Chrysler Building and the 70-story skyscraper at Wall Street, 40. Construction of Burj Khalifa, the highest skyscraper in the world located in Dubai, also started before the global crisis, and in 2009 a boom in the credit sector and the real estate market ended with the default of investment company Dubai World. The authorities of the UAE saved it, and the tower was opened in 2010. "If it were not for economic bubbles, we would miss many of the architectural creations," says David Fuller, co-publisher of the investment newsletter Fuller Treacy Monet

The Big Mac Index

One of the most famous "non-economic" indicators is the Big Mac Index, calculated by The Economist magazine. It illustrates the theory of purchasing power parity (PPP) and may indicate their undervaluation or overvaluation. However, many other factors influence the exchange rates. PPP is used in other ratings, for example, Deutsche Bank has calculated the cost of dating in different cities of the world.

source: businessinsider.com




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