Some Economists Look Beyond Housing Starts
STEVE INSKEEP, host:
Next, we're going to look more carefully at some of the economic indicators that we hear about almost every day, things like non-farm payrolls and housing starts. Economists rely on those numbers to judge how the US economy is doing and how it might do in the future. We asked NPR's Adam Davidson to look at the economic outlook for 2006 and the unusual methods used by some forecasters.
ADAM DAVIDSON reporting:
Sung Won Sohn runs Hanmi Bank. He got a grand accolade this week. He was announced the most accurate economic forecaster of the 2005 economy. He says all the official economic data told him the economy wouldn't do terribly well. But then he was talking to a customer who runs a company that makes 250-dollar pairs of designer jeans.
Mr. SUNG WON SOHN (Hanmi Bank): And so I actually went to a department store or two in LA to find out if those jeans were selling. To make long story short, I found out that not only were they selling well, but also they can't make them fast enough.
DAVIDSON: He decided if so many people can buy absurdly expensive jeans, then the economy's got to be doing better than the official data suggests. He was hearing similar things from other places, so he upgraded his assessment and he was right.
Daniel Gross writes the Money Box column for the online magazine Slate. He's become perhaps the leading exponent of obscure economic indicators. For example, take thoroughbred horses bought at the Keeneland auction in Kentucky. A multimillion-dollar horse only pays off over many years.
DANIEL GROSS: So the willingness of people to make long-term investments in these expensive products should give us a sense of who's really feeling optimistic about the long term, not just, you know, `I had a good year so I'll buy some horses today.'
DAVIDSON: Gross has a long list of obscure economic indicators. He's gotten good information out of Mexican mortgage rates. He says counting the inventories of Belgian factories can give you three months' advance word on how the global economy's doing. Or consider the title of his article on copper.
GROSS: "The Metal That Tells Us Almost Everything We Need to Know About the Global Economy."
DAVIDSON: Copper goes in lots of things, from new home construction to iPods, so if the price goes up because copper is in demand, it's a good sign that the economy's humming along.
Many economists have their own personal favorite obscure economic indicator. Some look to cardboard box sales to predict manufacturing output. Others say the sale of men's underwear, or the use of dry-cleaning stores gives a good snapshot of individual wealth. Charles Steindel is a vice president of the Federal Reserve Bank of New York. He says there is no such thing as a secret indicator that makes the economic future crystal clear.
Mr. CHARLES STEINDEL (Vice President, Federal Reserve Bank of New York): No. No, that's the problem. If there was one, people would know about it.
DAVIDSON: Steindel says there aren't any shortcuts. To get a good picture of the economy, you've got to do the hard work and slog through the official data. But, he says, he's human. He knows that can be boring and these obscure indicators are a lot more fun.
Adam Davidson, NPR News.
INSKEEP: Here's an indicator of the program you're hearing. It's MORNING EDITION from NPR News. I'm Steve Inskeep.