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.
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