Many times, economists and business people use the movement of inventory and other consumption indicators as proxies for the state of the economy. Consumer sentiment is a reliable one but it is often not possible to conveniently aggregate all consumption in even the smaller economies, leave alone one as large and complicated as the US. Writing in the NYT here, Adam Davidson explores the simple ways in which consumption of certain items reflect the recovery of sustained lack of confidence in the United States today.
As the article states, the trend in consumption of some items are far better indicators of the improved economic conditions than others. To my mind, it is sensible that the rising purchase of high cost wines may not be a representative of the whole economy because this good is primarily consumed by high income individuals whose consumption is not affected much because they have not had a squeeze on incomes. This merely shows that tracking the sales volumes of high cost wines is not the most useful way to assess the state of national consumption. It turns out that lipstick and nail polish sales go in different directions and that the latter has lost the predictive ability perhaps because of a structural change in the industry and consumption. It turns out that while sales volumes of high cost wines is not useful, the most consistent predictor is the consumption of champagne. And with the figures suggesting that consumption champagne going up, US citizens are popping corks for the right reasons. The world needs the US citizens to pop the champagne corks.
As the article states, the trend in consumption of some items are far better indicators of the improved economic conditions than others. To my mind, it is sensible that the rising purchase of high cost wines may not be a representative of the whole economy because this good is primarily consumed by high income individuals whose consumption is not affected much because they have not had a squeeze on incomes. This merely shows that tracking the sales volumes of high cost wines is not the most useful way to assess the state of national consumption. It turns out that lipstick and nail polish sales go in different directions and that the latter has lost the predictive ability perhaps because of a structural change in the industry and consumption. It turns out that while sales volumes of high cost wines is not useful, the most consistent predictor is the consumption of champagne. And with the figures suggesting that consumption champagne going up, US citizens are popping corks for the right reasons. The world needs the US citizens to pop the champagne corks.
No comments:
Post a Comment