Tuesday, October 9, 2012

Alan Greenspan's Favorite Indicator is Flashing Positive

When Alan Greenspan was chairman of the Federal Reserve and wanted to show off how much data he monitored, he would point out that one of his favorite indicators was underwear sales. His theory was, and there's probably a tiny bit of merit to it, that men don't spend money on new underwear when they are not confident about their incomes and the economy. Well, the underwear indicator is flashing positive, sales are up after an earlier slowdown.

HuffPo reports:
The NPD Group, Inc., a leading market research company, has shown an uptick in sales of men's underwear over the past year. Between Aug. 2010 and Aug. 2011, sales for all men's "underwear bottoms" were roughly $2.074 billion. In the period between Aug. 2011 and Aug. 2012, that number was $2.194 billion. That represents a 6 percent jump in sales from year to year.

Looking closer at the data, specific undergarment companies are flourishing in the current economy. HanesBrands Inc., for example, has seen underwear sales increase steadily over the past three years, climbing from $1.83 billion in 2009 to $2.01 billion in 2010 to $2.06 billion in 2011, according to SEC files. Sales for the first half of 2012 -- the most recent available data -- are also stronger, coming in at $1.17 billion, compared to $1.15 billion in the first half of 2011. The company's stock price, which hit a 6-month low of $24.78 per share on May 18, was over $33 per share on Monday...

"If you look at sales of male underpants it's just pretty much a flat line, it hardly ever changes," NPR's Robert Krulwich explained of the theory, after Greenspan's book "The Age Of Turbulence" was published. "But on those few occasions where it dips that means that men are so pinched that they are deciding not to replace underpants. And [Greenspan] said 'that is almost always a prescient, forward impression that here comes trouble.'"

In 2009, that certainly was the case. In April of that year, as The Huffington Post reported, the leading global research company Mintel produced a study showing a 2.3 percent drop in sales of all men's underwear products in 2009. The recession had come quickly and unexpectedly. In November 2008, Mintel had forecast underwear sales to grow by 2.6 percent in 2009.

Men, in short, were cutting back so dramatically on their spending habits that they were no longer buying underwear regularly. Three years later, with the economy showing some signs of growth -- albeit slow growth -- they're splurging a bit more.

14 comments:

  1. This really arouses my stimulus "package".

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  2. Couldn't this mean that a lot of us are shitting our pants?

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    1. undoubtedly the winner!

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    2. Woww....gotta start comment of the day or something cause of this guy.

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  3. Really? I tend to buy underwear when they finally wear through not depending on income.

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  4. Greenspan -- the terrible forecaster -- and his prognostic 'tool' (rimshot) should not sully your fine pages, sir.

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  5. I don't know what he is talking about. The line I am plotting in my underpants is quite vertical.

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  6. Wouldn't this indicator have some sort of time limit? You can wait a certain amount of time, but eventually the cost of postponing this purchase is too great.

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  7. After a long period of not spending on underwear, my underwear were just worn out. I had to spend some money but waited until they were on sale. Unlike the gov., now I have some support.

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  8. what happened to inflation adjusted increases?! 6% so what .... how Much of that increase is attributable to inflation?!

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  9. It could be that inflation is higher than they say and underwear just costs more now, which produces a higher total sales number. Just saying!

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  10. Men's underwear sales are way up because far more men are seeing the economic and fascist-police-state disaster that is coming very, very soon... and scared them so much they crapped their drawers.

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  11. Men buy new underwear when a girl tells them to.

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