Recession Underwear Indicator

Company Focus5/27/2009 12:01 AM ET
How your undies track the recession
To help predict a recovery, economists such as Alan Greenspan look to men's underwear sales. Here's what those and other unusual economic indicators say about the road ahead.

[Related content: stocks, retail, Wal-Mart, recession, Michael Brush]
By Michael Brush
MSN Money
Guys, if you want to know where the economy is headed next, look in your underwear drawer.

If you're like most men, you've got more than a few skivvies in, well, less than perfect condition.

If you're put off buying replacements -- and your significant other hasn't done it for you -- then guess what? The recession probably ain't over yet.

In fact, right now men's underwear sales suggest that things have bottomed but not started to recover.

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.

It's one of several unusual indicators economists turn to in hard times. We went looking through them in a quest for the much-discussed "green shoots" of an imminent recovery.

Underneath the underwear 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.

After a 12-month, 12% decline through the end of January, men's underpants sales leveled off during February and March, according to NPD. That suggests the economic was stabilizing, Cohen says.

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For a recovery, we'd need to see a return to 2% to 3% annual growth in underwear sales. And that's not in the cards, believes Bill Patterson, an analyst at consumer research company Mintel. Based on market research and surveys, Mintel predicts a 2.3% decline this year in men's underwear sales and no recovery until 2013.

That's four more years of saggy elastic and threadbare cotton.

Bra sales headed up?
Folks such as Greenspan don't seem to look as closely at women's lingerie -- reasoning, perhaps, that women are more sensitive about wearing worn undergarments.

But Cohen says a pickup in sales of bras, as well as denim and footwear, will indicate the economy is on the mend.

Video: 'Green shoots' aren't in the numbers

These are the sorts of items consumers wear longer in a recession, then replace when they feel confident enough to shop again.

Bra sales were up 4% during the first quarter, a key reversal given that women turned more frugal this recession than men did. Usually men pull back on spending more.

But denim and footwear sales remain sluggish, which suggests only stabilization, not recovery.

Watch those hemlines and midriffs
While economists now track sales, hemlines served as an oddball indicator for much of the previous century. In tough times, the experts muse, hemlines drop as an expression of conservatism, only to rise again as the markets hit go-go mode. During the late-1990s boom, the hemline indicator was supplanted by a midriff meter, as more women bared their stomachs as the popularity of tech stocks (and Britney Spears) peaked.

Readers talk: Which economic reports should I watch?

When the financial mess hit two years ago, blouses began replacing halter tops, and midriffs started to vanish, observes Jeffrey Hirsch of the Stock Trader's Almanac, which looks for seasonal and other patterns that traders can play.

If you believe this indicator, Hirsch says to watch for bellybuttons, plunging necklines and higher hemlines to confirm that we are in recovery mode. As I write this, looking around the streets of New York City on a warm spring day, it doesn't seem we are there yet.