Not only the bond and stock markets can signal an economic downturn.
From the men’s underwear index to the hem index, there are also a number of more unconventional economic indicators that might be worth watching.
Fears of a recession have recently increased. Investors are increasingly concerned that record-high inflation amid the Russia-Ukraine war, coupled with plans by the US Federal Reserve to aggressively raise interest rates, could slow economic growth.
This deepening sense of unease was reflected in the US Treasury market by what is known as a yield curve inversion, which has historically occurred before recessions. Investors have sold short-dated Treasuries in favor of longer-dated government bonds, causing 2-year bond yields to rise above the 10-year rate.
However, economists have stressed that an inversion in bond yields is by no means a guarantee of a recession. In fact, this indicator can appear up to two years before the onset of an economic downturn.
There is a range of other economic data that can serve as recession signals, including employment and consumer spending figures. Market watchers have also turned to more unusual indicators of economic health.
In 1999, the British economist Andrew Lawrence developed the so-called “skyscraper index”. The metric links the construction of the world’s tallest buildings to the onset of an economic crisis.
Lawrence said in a 2012 interview with the non-profit Council on Tall Buildings and Urban Habitat that he looked back to the late 19th century and found correlations between the completion of the world’s tallest buildings and economic crises.
Notable examples include the completion of the Chrysler and Empire State buildings in New York during the Great Depression.
Lawrence stated that the completion of these skyscrapers tends to “end a great construction boom.” However, he pointed out that it is not about the tall building itself, but about a “cluster” of these skyscrapers.
Regarding the recently completed Kuala Lumpa skyscrapers Merdeka 118 tower was Completed in late 2021, it is the second tallest building in the world. New York’s Steinway Towerwhich is said to be the thinnest skyscraper in the world and one of the tallest in the western hemisphere, has also just been completed.
For former Federal Reserve Chairman Alan Greenspan, it’s selling men’s underpants.
NPR correspondent Robert Krulwich already said in 2008amid the global financial crisis that Greenspan had explained to him that underpants are a good indicator of when men are buying bad times because they are one of the last items of clothing men buy.
Greenspan had reportedly said sales of men’s briefs tend to be fairly steady, but declines in sales suggest men’s finances are so stretched that they are deciding to hold off on buying replacement briefs.
The “Seam Index” originated in the 1920s on the back cover of a thesis by economist George Taylor of the Wharton Business School. The theory is that skirts get shorter when markets are up and longer when markets are down.
The economic exuberance of the 1920s and the advent of knee-length flapper skirts and the advent of the miniskirt in the 1960s amid stronger financial conditions have been cited as examples to support this theory.
However, questions about credibility were often raised.
A to learn Published in 2010 by the Econometric Institute of the Erasmus School of Economics in the Netherlands, monthly data on fringes were collected between 1921 and 2009.
“The most important finding is that the urban legend is true, but with a lag of about three years,” the report’s authors said.
Estee Lauder chairman Leonard Lauder developed the “Lipstick Index” in the midst of the economic downturn in 2001. He suggested that women would spend more on small luxuries like lipstick than pick-me-ups in tough times.
This theory did not come true during the 2020 Covid-19 pandemic Makeup sales declined as consumers have been restricted to staying at home during the lockdown.
Russ Mold, investment research director at AJ Bell, told CNBC by phone that while investors shouldn’t implicitly rely on these soft economic indicators, they are “always worth keeping an eye on.”
Mold said if the prices of luxury goods like champagne and art are “going through the roof” concurrently with stock prices, stock buybacks, mergers and acquisitions and debt, investors should be a little more concerned.
“It’s kind of a bullish, happy-days-are-will-on-ever-like behavior that just can’t last forever because it never does,” he said.