In this edition of Fun With Statistics we take a quick look at one of those odd economic indexes we come across every now and then.
An unconventional measure of how well the economy is doing based on sales of men's underwear. The reasoning behind this measure assumes that men view underwear as a necessity (not a luxury item), so sales of this product should be steady - except during severe economic downturns, when men will wait longer to buy new underwear. The notable decrease in underwear sales is said to reflect the poor overall state of the economy. Conversely, when underwear sales pick up, the economy is considered to be improving.
I know, we're all rolling our eyes right about now. But this particular index has a rather famous supporter (uh... nevermind).
Sure, this sounds trivial. But no less an economist than former Federal Reserve chief Alan Greenspan is a fan of men's underwear sales as an important economic indicator.
Greenspan reasons that because hardly anyone actually sees a guy's undies, they're the first thing men stop buying when the economy tightens. (He told this to National Public Radio's Robert Krulwich years ago.)
By extension, pent-up demand means underwear sales should be among the early risers when growth returns and consumers feel confident enough to shrug off "frugal fatigue," says Marshal Cohen, the chief industry analyst with NPD Group, which tracks consumer behavior.
How's the index doing this year, and what is it predicting?
Mintel began checking out men's underwear in 2003, and this year, the
company expects sales to fall about 2.3% — the first droop, er, drop
since then. A further decline, by about 0.5%, is expected next year,
though if you're still waiting at that point, we really think you
should skimp on something else, and splurge on a few new pairs.
Now for the real question: how does the underwear index account for the "going commando" distortion factor?