The Starbucks Index
» The desire of food is limited in every man by the narrow capacity of the human stomach; but the desire of the conveniences and ornaments of building, dress, equipage and household furniture seems to have no limit or certain boundary. « Adam Smith, philosopher (1723-1790)
You can study common economic indicators like the GDP, CPI, inflation, deflation, housing markets, unemployment or bull and bear markets to determine if our economy is heading in the right direction, but I prefer to take a different tack. Perhaps you could call it the “Main Street” approach as opposed to the “Wall Street” approach to analyzing the hopeful economic rebound.
My first “everyman” indicator is the SBUX Index or, spelled out, the Starbucks Index. In his February 19 editorial entitled “Starbucks becomes a harbinger of the economy,” Jonathan Last of the Philadelphia Inquirer explained it best: “Plot Starbucks’ stock price against the Dow Jones industrial average and you see that over the last four years, Starbucks has anticipated the market at nearly every turn. Starbucks’ stock started heading north in 2005, five months before the rest of the market started climbing. Starbucks began its decline in late 2006, just as the outlines of the recession were emerging on the horizon. And Starbucks’ stock dropped through the floor nine months before the Lehman Bros. Holdings Inc. crash sent the rest the market tumbling.” Today, Starbucks is on the upswing at $20.03 a share, an increase from a horrid low of $7.06 at its deepest losses of the recession.
Then there is always what Stephanie Rosenbloom of the New York Times calls the “Clip-and-Save Renaissance” in her September 24
article. Rosenbloom reports, “Coupon redemption ticked up 10 percent in the fourth quarter of 2008, compared with the period a year ago—the first jump in coupon redemption since the early 1990s. In the first half of this year, coupon redemption climbed 23 percent.” So in looking for recovery, we should be eyeballing coupon-clipping trends to see where they are in the next few quarters.
Alternately, you haves the Big Mac Index, which measures the strength of American currency against international currency. Or look to the Men’s Underwear Index (MUI), which you can read more about on page 70. The Appalachian Trail Hikers Index (ATHI) follows the number of hikers who left from Georgia en route to Maine. This year’s uptick explained that more people had time on their hands and, quite frankly, walking is free. If unemployment numbers start to decrease, I bet the ATHI will too.
The list of everyday indicators out there that accurately show our economic health are plentiful. And there are many that assert the recession is beginning to abate, from increases in wine auction sales to rises in restaurant dumpster levels. If we are observant of the world around us, all these minor details will begin to add up—hopefully in the value of the big old American Big Mac more than anything else.