China is reviving a leading indicator that was popularized during the aftermath of the financial crisis to tout a nascent economic recovery in one of its northeastern provinces. According to the Global Times, an English-language mouthpiece for the Communist Party, climbing sales of men’s underwear bodes well for the broader regional economy.
The Men’s Underwear Index was first popularized by Fed Chairman Alan Greenspan as a surprisingly powerful leading indicator. Here’s the gist: Sales of men’s underwear are typically relatively stable due to their status as a consumer necessity. But during periods of financial distress, men will delay purchasing new drawers, causing sales to dip.
So, when sales start to climb again after a prolonged slowdown, it’s a sign that more consumers may be feeling optimistic about the economic outlook. As the Washington Post pointed out back in August 2009, rebounding underwear sales had prompted some to speculate that the recession that followed the financial crisis might be about to end. And sure enough, data later reflected that economic growth had in fact rebounded, suggesting that the underwear indicator might in fact be a reliable indicator.
In its news story, the GT traced the growth in sales of men’s underwear over three years, noting that not only had sales risen, but that men had been “paying more attention to the quality and color variety of the clothes”. Underwear made by Playboy and two local brands were among the most popular.
Sales of men’s underwear in Liaoning has risen for the last three years, as consumers pay more attention to the quality and color variety of the clothes, according to recent information released by JD Big Data Research Institute.
Sales of men’s underwear across the province rose 42 percent in 2017 over the previous year while the year-on-year increase stood at 32 percent to date in 2018, the industrial data showed. The provincial year-on-year sales increase in 2018 grew even faster than that of other provinces.
According to the institute, underwear made of cotton is most welcomed, accounting for 48 percent of total shorts sales, and consumers in Liaoning prefer such brands as NanJiren, Septwolves and Playboy, marking an improvement from their previous consumption.
Other similar indexes like the ‘yogurt index’, ‘bread index’ and the broader ‘consumer goods price index’ similarly traced the recovery in the local economy. (There’s also the notorious ‘hemline indicator’, though as one recent study pointed out, the economic cycle predicts the hemline, not vice-versa). Liaoning reported a turnaround to growth of 4.2% in 2017 before accelerating to 5.6% in the first half of 2018, and 5.4% in the third quarter.
“The recovery is mainly due to coal and steel prices rising during the period,” Liang said, “and the recovery can also be seen in the volume of railway and road freight, electricity consumption of industry, volume of business and employment.”
“About 44 percent of the local employment is created by new industries like e-commerce and food delivery. Private enterprise accounts for vast majority of the employment, along with self-employment,” Liang said.
However, China fears that growth across various industries has not been broad based enough to sustain this pace (particularly, we imagine, after the raft of troubling economic data out earlier this month, which itself was only the latest sign that China’s torrid GDP growth is finally beginning to cool).
To mitigate this risk, the Northeastern region needs to “make up for shortages with new businesses, services, and light industry,” the expert said.
And if China follows through on its widely touted market liberalization, these industries might soon have some help from foreign investors.