If you’re like me (as in, not an economist), the indicators of economic health put out by various organizations can seem contradictory at best. What’s a person to think? There’s an old joke about economists that seems to be relevant in these times: “Economics is the only field in which two people can get a Nobel Prize for saying exactly the opposite thing. ” With that in mind, here are some contradictory but apparently factual recent tidbits:

• The U.S. Bureau of Economic Analysis says that the annual growth rate of the country’s gross domestic product (GDP) was 2% for the years 2011-2013. That’s pretty good! But that’s an adjustment from earlier reported annual GDP growth of 2.2% (2.0% ≠ 2.2%: not so good).
• Meanwhile during the first half of 2014, China reported an annual GDP growth rate of 7.4%. That’s good! But the aggregated GDP growth of China’s provinces exceeds 7.4, meaning that the number can’t be trusted. That’s not too good.
• Imports into U.S. ports hit a five-year high (4.3%) in July as retailers rushed in holiday goods. That sounds good, except that the volume reflects retailers’ desire “to avoid potential disruptions as West Coast longshore workers negotiate a new labor contract ” (according to Bloomberg). A strike would be bad news.
• Aggregated U.S. stock market performance is better than 195% since 2009. That’s very good… no, wait a minute! That’s scary because it matches the rate of growth in the period prior to the DotCom crash of 2000.
• Stanford University recently published a reseach paper called the Poverty And Inequality Report, and it says that “In November 2013, six years after the start of the Great Recession, the proportion of all 25-54 year olds who hold jobs (i.e., “prime age employment “) was almost five percent lower than it was in December 2007…. “. that’s bad!
• Closer to home, last week NBC News reported that, “most retail workers are earning less than they were 35 years ago, after adjusting for inflation…. “ — that’s bad, since our employees are also consumers who can’t.

In our industry, it’s just as confused. Back in February, the NRF (National Retail Federation) released a pretty rosy projection for retail sales in 2014, estimating a very good 4.1% gain. But a March 2014 article in InvestmentWatch entitled 20 Facts About The Great U.S. Retail Apocalypse That Will Blow Your Mind (you already know that this is going to be bad!) shared these factoids (among others):

• Approximately a billion square feet of retail space is sitting vacant in the United States.
• Earlier this year Radio Shack announced that it was going to close more than a thousand stores.
• Earlier this year Staples announced that it was going to close 225 stores.
• J.C. Penney lost 586 million dollars during the second quarter of 2013 alone.
• Sears has closed about 300 stores since 2010, and CNN is reporting that Sears is “expected to shutter another 500 Sears and Kmart locations soon “.
• It is being projected that Aéropostale will close about 175 stores over the next couple of years.
• The Children’s Place has announced that it will be closing down 125 of its weakest stores by 2016.
• Best Buy recently shut down about 50 stores up in Canada.
• It is being projected that sales at U.S. supermarkets will decline by 1.7 percent this year even as the overall population continues to grow.
• McDonald’s has reported that sales at established U.S. locations were down 3.3 percent in January.
• Even Wal-Mart is struggling right now (ed. note: that’s not news!)

It’s tempting to dismiss all of this as just-so-much background noise, but the truth is the health of the economy affects everyone, and in retailers’ case, pretty directly. So the question of the day is, is there any one traffic light indicator that non-economists like me can use to determine whether its time to start saving nuts for a harsh winter, or are the lights still green/all systems go?

Everybody Eats

Apparently I’m not alone in trying to find a lazy way to read the economic tealeaves. Back in 1986, the Economist developed a tongue-in-cheek indicator called the Big Mac Index. The idea behind that index was to gauge whether different currency exchange rates are correct. Since a Big Mac is a Big Mac everywhere, comparing the cost of one in (let’s say) China or Finland to the price in the USA gives a sense of the relative purchase power of currencies in those countries. Perhaps to the amazement of the Economist, burgernomics caught a tailwind, and is now taught as part of many schools’ Econ curricula as one indicator of purchase power parity. If nothing else, this demonstrates how hungry people are (pun intended) for an easy explanation to complex theories.

Perhaps how and what people eat, is an indicator of the health of economies and should be taken seriously? According to the NY Times (3/13/2012),

“The relative sales trends of different types of restaurants provide an indication of the health of the economy. When Americans feel better about their finances, they are more likely to eat at restaurants with full service, including bringing the food to the table, rather than at restaurants with limited service. ” Well, if that’s true, then the U.S. economy is truly booming, because last week the Chicago Tribune reported that, “July’s 2.5 percent decline … (is) the worst comparable sales McDonald’s posted since March 2003, when its global comparable sales plunged 3.7 percent. “

Sit-down restaurants are doing better. But wait! The National Restaurant Association recently reported that, “due in large part to softer customer traffic levels, the RPI (Restaurant Performance Index) registered a moderate decline in June. The RPI stood at 101.3, down from a level of 102.1 in May and the first decline in four months. “ (ed. note: an RPI above 100 is considered good, below 100 is bad, so 101.3 is still pretty good).

So perhaps looking at the relative revenues of fast food vs. full service restaurants isn’t so useful. And so it seems to be: according to the earlier mentioned NY Times article,

“over time the relative sales trends of the different types of restaurants have generally coincided with changes in the gross domestic product numbers. But recently, that relationship seems to have broken down, with the economy growing much more slowly than the restaurant numbers would indicate. “

Well, what’s the lazy armchair economist to do? Before I gave up altogether on trying to assess how the rest of 2014 is going to play out based on how well people are eating, I took at look at how one very large food distributor, SYSCO, is doing. In May, the company reported that sales saw an increase of 3.2% from the third quarter of fiscal 2013 (pretty good!). But, this just in! Yesterday (8/11/2014) the company announced that its fiscal fourth-quarter earnings fell 10% because of higher costs. Food-cost inflation was unexpectedly high (4.1%), due to higher costs in the meat, dairy and seafood categories (Inflation = Bad!). I wonder what inflation rates do to the Big Mac Index?

Enough for One Day

I give up. At least for today I’ve decided to leave economics to economists, and stick to my ol’ man’s advice that if you are patient, keep minding your own business, and keep an open mind to new ideas, over time “things ” will tend to improve. It’s uncanny how much the behaviors of those companies that RSR calls “Retail Winners ” seem to follow that simple advice.