Different ways of seeing stats
Who would have thought cinema popcorn sales could tell us much about the economy? Yet sales of the snack could be just one unlikely indicator of economic fortune, says Michael Blastland.
How do you measure a green shoot? From the tub, if you are Norman Lamont, a former Chancellor of the Exchequer, who famously coined the phrase "green shoots", while detecting recovery from the last recession (accurately, as it turned out, despite media ridicule) and also gave us "singing in the bath" as a measure of his own equanimity under pressure.
But first, you have to know what constitutes a green shoot. What small, seemingly insignificant sign now reveals our destination in the near future?
SUGGEST A NEW INDEX
Popcorn sales, numbers of cranes and junk mail are just some of the things which might indicate economic activity
Suggest something to measure below
This week we'll feature some of the best, and keep tabs on them
No, not the horoscope. If you want anything passably rigorous, it requires measurement. So take up your ruler, go forth and measure.
"What exactly am I supposed to measure?" you ask. Good question.
Sometimes it seems as if half of economics is little more than a quest for a better index. This continues despite decades of failure.
Part of the difficulty is that different green shoots indicate different kinds of improvement. Some are suggestive of all the things we make and sell, some of trade, others of recovery in the housing market. Any can occur without the others.
If I were to reveal, for example, that the height of Alistair Darling's eyebrows changes in precise proportion to GDP growth six months later, it would be an economic breakthrough of cosmic proportions.
If there really were such a simple and reliable indicator of future economic conditions, predicting the recession would have been easy, betting on the economy via the stock market would wither and we'd probably see an eyebrow derivatives market. My Nobel prize would be in the bag.
It isn't. But that's not to discredit out of hand unconventional ways of spotting green shoots. There's fun to be had in identifying unlikely bell-wethers of recovery - which is why we want you to suggest your own - the best of which, we will measure.
Here to set you thinking are some less-than-standard measures of green shoots and turning points suggested in recent weeks, and a few that are more orthodox.
- The crane index. How many cranes are visible from a given point. Really a measure of optimism about the prospects for commercial property.
- The number of people signing up to dating agencies offering extra-marital affairs, on the basis that demand goes up either in times of excessive confidence - "I won't get caught"; or depression - "I don't care". (Sex had to figure somewhere.)
- The Dry Baltic Index. A measure of demand for shipping. Since it takes two years to build a container ship, freight capacity is inflexible, so small changes in demand can cause marked changes in price.
- The Popcorn Index. Sales of popcorn at the cinema are, it was suggested in a newspaper recently, a sensitive barometer of consumer behaviour.
And here are a few others, the result of our own in-depth - two minute - musing over a cup of tea.
- The junk-mail index. How many items per week hit the mat?
- The number-of-property-shows-on-telly index.
- On the basis that there's a link between confidence and risk-taking, a speeding index, also because people are in a greater hurry when there's business to be done.
- A niceness index. When things are going well, are people friendlier? But how would you measure it?
Over to you. Send your suggestions for useful, and, crucially, measurable, indexes of recovery using the form at the bottom of this story.
Finally for the curious, some leading indicators - to use the techie term - do seem to perform reasonably well, though less usefully than might first appear. This one, for example, from the OECD, shows how a composite of leading indicators - the red line - often move about six months before another measure of real economic activity.
Not perfect, but not bad. Incidentally, the latest OECD CLI for the UK only has been going up for a few months now. One problem is that there are sometimes false-start turning-points in the leading indicators which turn out to go nowhere. We can see them afterwards, but at the time how do we know if the latest turning point is really a turning point or if it will, as sometimes happens, wobble a bit then go back the other way? We often need time to confirm that a trend is real, and time, of course, is what a leading indicator is supposed to beat.
The leading indicators the OECD uses for the UK include new car registrations, the Confederation of British Industry's business climate survey, a measure of the stocks of finished goods and a measure of consumer confidence, all weighted, added together and compared to an estimation of the trend. You can find out
how it's done, in all its bulky complexity, here
This is your chance to become amateur economic forecaster. Suggest something that is observable in every day life which might conceivably be an indication of green shoots. The Magazine will discuss some of the best this week and keep tabs on them.
Number of packed lunches in the office fridge. It's certainly gone up in recent months, however it appears to probably drag behind rather than being an early indicator.
How about the 'chugger' index? Measuring the amount of people who give money to those annoying people with vests in town centres asking for money for charity. Surely there's a link between economic growth, disposable income and donating to charity.
Try the "Peak Shoulder" index. This is based on the number of people travelling on trains AFTER the peak hour (arriving London 09:00-10:00) and BEFORE the cheap day returns are available (arriving London usually after 10:30, depending on origin). These Peak Shoulder trains are used by people who don't have to be at their desk by 09:00 every day, so they are coming into town to attend meetings etc 10:00 where ideas (hopefully) will be generated. The more of these there are travelling, the more things are moving.
Simon Jeffs, Eastbourne
Number of free items given away as part of marketing promotions outside London train stations in the mornings. This has noticeably decreased over the last year; it would be interesting to see if more free stuff is given away as confidence and consumer spending increases.
Neil Marshall, Sutton, UK
My wife and I have noticed something that certainly (while not scientific) indicates people's view on their own financial situation - loose change on pavements. Until last September you would always find coins on the pavement, typically 1p and 5p coins but sometimes as much £2 - no matter what the season. Once the headlines were full of the credit crunch, we never saw any change on the pavement. However, starting in late April, lost coins again starting to appear on London's streets and in the last month it appears we are back to pre-credit crunch levels. Either people were afraid of their financial situation and more careful with their change or they spent less and so had fewer opportunities to lose any coins.
How about reconditioned bricks? Not sure if that's the right name but sales of bricks that have came from demolished buildings, this could be used to measure the supply (showing how many buildings are being torn down to make way for new developments) and the sale (showing how many people are putting extensions on houses, possibly indicating the ability to gain credit, increased value of houses etc...). You would probably expect the ratio of supply:demand to be around 1:1 if this indicator does work.
Richard, London, England
The ratio of sun tan lotion to fake tan - sunshine getaway, staycation, or no holiday at all?
Lyn Jarvis, Milton Keynes
New adverts on telly and not all the re-runs tend to indicate the money is available there to produce the ads and encourage more spending .
Maybe count people eating ice cream on a Saturday afternoon? Ice cream for a family can be expensive, and is one for the things that gets cut down upon in a recession. By the by, no good just counting cranes, you need to count how many of them are actually moving and doing work.
Rosemarie Tomes, Mansfield
Number of skips on any given road - more skips = more people spending their savings on housework.
Hiral Patel, Leyton
My indicator is whether there are seats available on the bus in the morning. Before the recession, the bus was always full, sometimes not even standing room. But now there are seats available. I'll know there's green shoots when all seats are taken by the time it gets to my stop.
Helen S, London
Gym memberships taken and gym use. In time of downturn people are more likely to cancel unwanted memberships. Meanwhile those that actually have a membership probably use it less when they are busy, in a time of economic upturn for example.
A "number of empty advertisement spaces in bus stops" index
Car Wash Index - When people feel flush they go to the car wash. When there are money worries they was their own car.
Craig Campbell, Leeds
The number of job ads in professional journals. My made-redundant-in-February husband has been scanning the jobs in his weekly professional journal. From a grand total of zero jobs for many weeks now, the past few weeks have seen at least one job a week for the whole country. At this rate he may be re-employed by the next decade
Aqua Suliser, Aqua Sulis
The White Goods Delivery Index based on the lead time in ordering and having delivered any large electrical item. The theory is based on a twofold principle, That if the goods are in stock the demand for purchase is low and so it follows that if a store can deliver in 2 days then there delivery system is in surplus again indicating low demand. When you have a 5 day wait for Delivery to the store and a further 5 days for physical delivery this will be the turning point in the recovery, as firms such as warehouses and delivery van companies will start to employ to cover increased business.
The sick on the street index? More people going out the night before spending more money on drink, means more sick on the street the morning after.
Carrier bags photographed in a given area within shopping mall.
I reckon a useful way of judging the economy's return is by charting the column inches of positive news stories versus the column inches of negative news stories. That is, speculation causes negative stories which cause worsening public feeling, deepening the recession. Positive news stories create happiness, stimulating public opinion and increasing economic growth. Just keep talking about the nice things and people will feel better which will in turn make contribute to the economy without even knowing it.
Paulo, Wetherby - UK
On the way to work count the number of full taxis in central London.
Easing of credit - I've had three offers of credit cards/personal loans this week. (I turned them down - no going back to the old days.)
A prime economic indicator are the number of skips being used for housing/building work in affluent areas of London.
Andrew Drummond, London
How about 'length of hair'? Getting your hair cut (men's and women's) can be expensive, could be considered a 'luxury' and so may have been cut back on (ahem), yielding, on average, longer hair. Might need to be "seasonally adjusted" and might be influenced by people, like me in fact, swapping a trip to the barber for a set of clippers and trust in your wife to do it.
Mark Crankshaw, Steeple Morden, UK
Has anyone actually done a statistical analysis of the popcorn-v-FTSE data or have they just been plotted on an axis and seen to look kind of the same? For example, if you look at the 21 weeks represented on the graph, you'll see that there are only actually twelve where the popcorn index and the FTSE move in the same direction. (I'm including the first week of June, where the FTSE was flat but popcorn fell, but not the last week of June, which I think shows a very slight decrease in the FTSE but an obvious rise in popcorn). In other words, if I tell you whether popcorn is up or down and ask you to tell me whether the FTSE is up of down for that week, you'll only be right half the time -- exactly what you'd get from tossing a coin! Further, this doesn't seem to offer a *prediction*. The rise in popcorn in week 3 is a week behind the rise in the FTSE in week 2; popcorn continues to fall in week 11, when the FTSE has already started to recover; popcorn falls in week 20, again lagging the FTSE by a week. If anything, eyeballing the graph suggests that this week's FTSE performance predicts next week's popcorn sales. But who, outside the catering industry, cares about predicting demand for popcorn? To use your eyebrow analogy, this seems to be saying that I can predict *last week's* FTSE movements by measuring the height of the Chancellor's eyebrows. But I can get a much more reliable prediction (perhaps one should say "postdiction") by just looking at the published market data.
David Richerby, Leeds, UK
I live near a freight train line into London, I can tell you right now that shipping activity has increased recently.
Stuart Udall, London UK