It’s not just the bond and stock markets that can signal an economic downturn.
From the Men’s Underwear Index, to the Hemline Index, there are also a number of unconventional economic indicators that may be worth watching.
Fears of a recession have increased recently. Investors are becoming increasingly concerned that record high inflation amid the Russia-Ukraine war, combined with the Federal Reserve’s plans to aggressively raise interest rates, could slow economic growth.
This deep sense of unease has been reflected in the US government bond market, through what’s known as a yield curve inversion, which historically occurred before recessions. Investors were selling short-term Treasuries in favor of long-term government debt, driving two-year yields above the 10-year average.
However, economists have stressed that a reversal in bond yields is by no means a guarantee of a recession. In fact, this indicator can appear two years before an economic downturn.
There are a slew of other economic data that can serve as signs of a recession, including employment numbers and consumer spending. Market watchers have also turned to unusual measures of economic health.
British economist Andrew Lawrence developed the so-called “skyscraper index” in 1999. This measure links the construction of the world’s largest buildings with the start of an economic crisis.
Lawrence said in 2012 Interview With the nonprofit Council on Tall Buildings and Urban Habitat it looked at it in the late 19th century and found connections between the completion of the world’s tallest buildings and economic crises.
Notable examples include the completion of the Chrysler Buildings and Empire State Buildings in New York during the Great Depression.
Lawrence explained that the completion of these skyscrapers tends to “cover a major building boom.” However, he noted, the problem is not with the tall building itself, but rather when there is a “cluster” of such skyscrapers.
In terms of recently completed skyscrapers, Kuala Lumba Merdeka Tower was 118 Completed at the end of 2021, it is the second tallest building in the world. New York Steinway TowerIt is said to be the narrowest skyscraper in the world and one of the tallest skyscrapers in the Western Hemisphere, has just been completed.
For former Federal Reserve Chairman Alan Greenspan, selling men’s underwear is selling men’s underwear.
NPR reporter Robert Krulwich Said back in 2008In the midst of the global financial crisis, Greenspan explained to him that because underwear was one of the last pieces of clothing men looked to buy, it served as a good indicator of bad times.
Greenspan reportedly said sales of men’s underwear tend to be quite consistent, but the dips in sales indicate that men’s finances are so strained that they’ve decided to put off purchasing replacements.
The “hemline indicator” appeared on the back of a thesis in the 1920s by Wharton School of Business economist George Taylor. The theory is that skirts get shorter when markets are up and they get longer in downturns.
The economic boom of the 1920s and the emergence of knee-length flapper skirts, along with the advent of the short skirt in the 1960s amid stronger financial conditions, have been cited as examples in support of this theory.
However, questions have often been raised about its reliability.
a study Published in 2010 by the Erasmus Institute for Econometrics, in the Netherlands, it collected monthly data on hemlines between 1921 and 2009.
“The main finding is that the urban legend is true but with a time lag of nearly three years,” the report’s authors said.
Estée Lauder’s president, Leonard Lauder, developed the “lipstick index” amid the economic downturn in 2001. He suggested that women spend more on small luxuries, such as lipstick, as eclectic products when times are tough.
This theory was not true during the Covid-19 pandemic in 2020 when Cosmetics sales fell Consumers have been restricted to staying indoors during the lockdowns.
Ross Mold, director of investment research at AJ Bell, told CNBC by phone that while investors should not rely on these implicitly soft economic indicators, they “always deserve attention.”
And when prices for luxuries like champagne and art top out simultaneously with stock prices, share buybacks, mergers and acquisitions and debt, investors should start to feel more anxious, Mold said.
“It’s kind of a bull market, and the happy days – they’ll work – and they’ll be – forever – the kind that can’t go on forever, because they never go on,” he said.
“Twitteraholic. Total bacon fan. Explorer. Typical social media practitioner. Beer maven. Web aficionado.”