Quirky Economic Indicators
Famous for its Big Mac Index (an informal way of measuring the purchasing power parity between two currencies) The Economist recently asked readers to send in their wacky economic indicators. A vet claimed that his business leads the economic cycle by 6 months – in tough times pet owners are quick to cut back on vaccinations and non-essential surgery. A leader’s hairline has also been seen as an indicator – when they recede economies are likely to follow. The most relevant indicator came from an investment analyst who noted the number of searches on google for “gold price”. During the start of the financial crisis in 2008 the gold price tumbled but the number of searches on google for the “gold price” increased markedly. The chart below shows that the number of gold-price searches shoots up when consumer confidence dives and subsides when households perk up again.
Some other interesting indicators I have come across include:
The Briefcase Indicator
Alan Greenspan (former US Fed Chariman) had the ‘Briefcase Indicator’. Cameras from CNBC would follow him on the mornings of Federal Open Market Committee meetings as he arrived at the Fed. The theory went that if his briefcase was thin his mind was untroubled and the economy was well. But if it was stuffed full, rumour had it that he was up all night and a rate hike was on the cards. For the record Greenspan explained in his book “The Age of Turbulence” that the size of his briefcase was solely a function of whether he packed his lunch.
More Mosquito Bites
In Maricopa County, Arizona, there are a vast number of house that have been abandoned by their owners – forelosures. Within these properties are swimming pools or ponds which are now unattended. Before the financial crisis local authorities only treated 2,500 but in 2009 after the housing market collapse 4,000 were treated.
Tractor Sales in NZ
A favourite of mine and one that I blogged on earlier is new tractor registrations. If the primary sector is doing well NZ is also. Within an advanced agricultural base, tractors form a crucial part of the production process and has played a significant role in the increase in productivity in New Zealand since the removal of subsidies. Looking at the number of new tractor registrations there was a significant fall in the post subsidy period of 1984 – 1988 where the number fell from 2,218 to 711 respectively. This reflected the elimination of concessionary farm loans, price supports, low-interest loans, disaster relief, weed eradication subsidies and special training programmes to get them through the hard times.
The recession index (the R-word index) is an informal index created by The Economist which counts how many stories in the Washington Post and the New York Times using the word “recession” in a quarter. This simple formula pinpointed the start of recessions in 1981, 1990, and 2001, but was misleading in the early 1990s, when the index indicated a recession for a year after it had officially ended in March 1991.