It is no secret that GDP data is a lagging economic indicator. For example, we are already approaching the end of the third quarter, but the latest update we have received is a revised estimate of second-quarter growth, which has risen from 3.0% to 3.3%. This shows why relying solely on GDP data is not very useful.
That is why analysts often resort to alternative, sometimes unconventional measures. One of the most famous is the so-called “lipstick index.” The idea is that during recessions, women reduce their spending on expensive beauty products and clothing and opt for small, affordable luxuries such as lipstick, nail polish, or perfume.
The problem is that the lipstick index may be losing relevance, as shoppers increasingly seek value for money in the face of an overload of choices. The same skepticism applies to theories such as skirt length (shorter skirts supposedly mean a stronger economy) or nail length (longer nails indicate prosperity).
Some suggest predicting recessions and declines in the S&P 500 or Dow Jones by observing demand for hairdressing services, as customers supposedly choose cheaper treatments. Others point to young people making cappuccinos at home instead of going to coffee shops, or to increased applications to law schools.
More meaningful indicators are available, such as trends in sales and cardboard production. The logic is simple: if box manufacturers reduce production, this may indicate lower demand in the future. When companies expect growth, they order more boxes; orders dry up quickly when they anticipate a slowdown in sales.
Another one is the “trash index,” which tracks waste volumes as an indicator of economic activity.
Generally, more waste means more production and consumption. Since it reflects activity in real time, it can highlight changes before official data does. However, its reliability is limited by factors such as increased recycling rates and the digitization of consumption. Thus, it should be used with other indicators.
For example, the Baltic Dry Index (BDI) which measures shipping costs for raw materials like coal, iron ore, and grain across global routes. A rising BDI points to growing demand for raw materials, often signaling expansion, while a falling BDI suggests weaker demand and a potential slowdown (for now, it's sitting at its yearly highs).
Similarly, the truck tonnage index provides a basic snapshot of the U.S. economy. Since trucks transport approximately 70% of all domestic goods, any increase in this index suggests real growth in manufacturing, retail activity, and construction. If goods aren't moving, neither is the economy.
