Saturday, October 10, 2009

"Going Commando" Index to Gauge Economy

Want to figure out where the economy stands? Look no further than men's underwear.

How is the economy doing? Look in your underwear drawer
(Bruce Watson, 9/29/09 Daily Finance at AOL)

"It looks like 2009 was a bad year for men's underwear. Mintel, a consumer research firm, says that sales of men's skivvies dropped 2.3 percent from 2008. Meanwhile, NPD Group, another firm, argues that the decline was more on the order of 12 percent. Either way, it's a fair bet that many underwear drawers are looking a bit ragged.

"Some analysts refer to this economic measure as the "underwear index." While seasonal outerwear, flashy luxury clothes, and women's lingerie are often tied to seasons or holidays, men's undies tend to be pretty straightforward. They are replaced as needed, which means that their sales should remain relatively constant.

"In this context, 2009's drop in the sales of men's underwear means that many men are walking around with busted elastic, fabric that has worn thin, or a much-reduced stock of spare BVDs. Given the difficulty of getting a few extra months out of a pair of boxers, it suggests that many men are reaching the end of their easily-absorbed cutbacks. After all, while eating out less or taking fewer trips can be a minor annoyance, wearing tired underwear or -- worse yet -- going commando suggests that consumers are truly caught on the horns of a financial dilemma."

Don't laugh. The underwear index is a favorite of Alan Greenspan.

"While an unusual measure of the economy, the underwear index is reportedly one of Alan Greenspan's favorite statistics to consult. Part of its significance probably lies in the possibility that, for many men, buying underwear is largely unconscious. When asked about the state of his underclothes, one consumer (who chose to remain nameless) stated, "Actually, I'm running out. I don't know how it happened." He went on to note that he has been cutting back on some expenses. As the drop in underwear sales continues, it seems to be shifting from an unconscious to a conscious trend; in the process, it is becoming increasingly significant, as consumers deliberately sacrifice comfort for cash."

The article continues. You can read the rest of the article by clicking the link above.

According to the writer, the underwear index, like the unemployment rate, is a lagging indicator. If one examine the index components, there seems to be a subtle shift from boxers to briefs (briefs sales up 0.6% against boxers sales), indicating cash-strapped consumers seeking more bang for the money. The article cites a 7-pack of BVDs costing the same as a 2-pack of boxers at Hanes.


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