Economic forecasting for dummies: Check hemlines, men’s underwear

Posted at 01/04/2010 4:31 PM | Updated as of 08/04/2010 6:35 PM

MANILA, Philippines – Are you searching for clues on the health of the economy? Why not stand in line at the movies or check your gal pal’s skirt length?

While the “R” word (recession) gripped the global economic scene in 2008, typical indicators—gross domestic product, gross national product, inflation, exports, budget deficit, and others—became a hit. To the uninitiated, however, they tend to be after-the-fact and intangible measurements.

Here are indicators that you will not hear central bankers, economists and analysts quoting any time soon. These are off-beat, quirky, proletariat metrics on the state of the economy.

1. Men’s underwear

A dip in the sales of men’s underwear is a sign that people are feeling the pinch. Take it from Alan Greenspan, former chair of the US Federal Reserve.

In Greenspan’s book, “The Age of Turbulence,” he said men tend not to replace their underpants when they have a forward impression that trouble is coming. His reasoning: the sales of such a necessity fluctuate the least among all apparels, so even the slightest change in numbers can be revealing.

A survey by the global research company Mintel projects a 2.3% drop in sales of all men's underwear products in 2009. Some attribute this to the influx of cheaper Chinese label products. Others cite the psychology of recession.

2. Skirt-length index

The oldest adage about fashion and the economy is that hemlines rise and fall with the stock market.

This theory holds that the prevailing skirt length is a strong indicator of consumer confidence. After all, a short skirt cannot be altered, while a long skirt's length can be changed several times to accommodate different seasons and fashions.

The idea is that shorter skirts tend to appear in times when general consumer confidence and excitement is high. Read: the markets are bullish, it’s time to buy. In contrast, the theory says long skirts are worn more in times of fear and general gloom. Read: things are bearish, it’s time to sell.

According to Investopedia.com, hemlines indicator is the most legitimate among the quirky economic signs. Fashions do indeed tend to show skin when times are good. However, fashions do not change until times are good, making skirt lengths a lagging indicator. Investors prefer tell-tale signs that point to the future.

3. Lipstick Index

The chairman of Estée Lauder Cos. Inc., Leonard Lauder, floated the lipstick theory in 2001 after the 9/11 terrorist attacks. Going over sales data, he noticed the company was suddenly selling a lot more lipstick than usual. Newsweek picked up it up and made this quirky indicator famous.

Lipstick sales apparently increase because people want to feel good about themselves, especially when they are running low on cash and prospects. Women find it better to spend on small-ticket affordable luxury items to feel better for a day or a week.

Kline Consumer Products Research Practice crunched 50 years' worth of sales data, and found lipstick sales did indeed increase during tough times. They said the data indicated that for every 1% increase in the unemployment rate, women buy $25-million more lipstick during the year.

However, when Estée Lauder warned of over 5% lower sales during the height of the global recession scare in 2008, the lipstick index has been discredited.

4. Foundation index

The Financial Times floated an alternative to the lipstick indicator. It’s called the “foundation index,” purportedly a shift in female consumers’ recession-era makeup of choice.

Flawless skin is reportedly replacing the perfect pout as a woman’s answer to tough times. Another cosmetics company, L’Oréal, reportedly claimed that it’s foundation sales are skyrocketing as lipstick—and everything else—bottoms out in 2008.

When foundation tanks as a frivolous cosmetic-cum-economic index, will mascara be next?

5. Dye Jones Index

In tough times, people do stuff themselves rather than pay for them. Thus, another esoteric indicator: the “Dye Jones Index,” a spin to Dow Jones Industrial Average Index, which gauges the performance of the industrial sector within the US economy.

According to branding boutique Tribe, Inc., which coined this index, women respond to the economic recession by curtailing salon and spa appointments. They switch from hair salons to do-it-yourself home hair color.

Men, on the other hand, grow a ‘recession beard.” The loss of job makes the unemployed male down in the dumps, and the laziness makes him less likely to shave.

6. Long hair indicator

The Japanese have discovered that upturns in economy are marked by the “Long Hair Indicator.”

Women tend to wear their hair long when Japan's economy is doing well and short when there is a slump, Reuters reported, citing a survey conducted by Kao Corp., Japan's second-largest cosmetics firm. 

During the 1990s economic slump, short hair–defined as above the collarbone–became the dominant hairstyle for Japanese women. But since 2002, long hair has regained some popularity – coinciding with a mild economic recovery.

7. The Moviegoing Index

According to Kiplinger, a personal finance site, the cool darkness of a movie theater is one of the best places to escape from unemployment and foreclosure woes. It is one of the least expensive entertainment options out of the house.

In the first quarter of 2009, US theater owners reported 9% higher ticket sales. Box-office sales have increased in all of the last five recession years, according to the US National Association of Theatre Owners.

This may not be applicable to Filipinos, though. SM Prime Holdings, the operator of the largest network of movie theaters nationwide, reported that Filipinos still flocked to the malls in 2008, but they didn't shop, dine and watch movies as much as they did in 2007.

It booked a measly increase in cinema ticket sales to P1.85 billion in 2008 from the P1.84 billion in 2007. In 2006, ticket sales grew 15%.

8. The Hot Waitress Index

New York Magazine proposed the "Hot Waitress Index." The worse the economy, the hotter the waitresses, it said.

The magazine noted that attractive females could find jobs in modeling, marketing, or real estate when the economy is good. When the economy takes a turn, those opportunities dry up, and then restaurant owners snap them up to wait tables.

9. Toothbrush effect

Oral-B, a hygiene firm, revealed the ‘Toothbrush Effect’ as the latest economic indicator during the the launch of National Smile Month in Europe in 2009. According to its research, sales of power toothbrushes are up 30% compared to 2008. This meant the financial forecast may be glum.

Oral-B’s survey shows that 62% of women said they would prefer to sacrifice their hair straighteners when on a budget, compared to just 14% who would give up their power toothbrush. A firm executive noted that buying a power toothbrush is actually a credit crunch friendly way to take care of your teeth since regular use of a power toothbrush generally need a lot less work—and money—when they come in for check-ups. Prevention is an investment, indeed.

Moreover, Oral-B research shows that 50% of recruitment consultants think unhealthy looking teeth could reduce the chances of being successful in an interview, while 83% highlight smiling and looking interested as good interview technique.

Why not smile your way to success?