Maybe economists just have overactive imaginations or maybe in that mind-fogged, early morning queue at the coffee shop, they just have too much time on their hands. Either way they seem to be susceptible to the percolation of coffee based economic theories. I must confess that I too have fallen prey to these same speculations and have blogged about them in the past.
The Great Recession, as our recent economic difficulties have come to be known, has served as a wakeup call for many of us. Its shock effect coincided with the beginning of my association with the individual that I have dubbed the Perma-Bear. As his name implies, the Perma-Bear has been somewhat less than optimistic about the economy, but I cannot say that he has been any less correct either. 2009’s steady drumbeat of bad economic news eventually drove me to formulate my Starbucks Index as a leading economic indicator and a sign of better times to come. For my Starbucks Index, I simply count on a daily basis the heads ahead of me in line when I first get into the store.
I frequent my neighborhood Starbucks so much so that only the newest-of-new baristas there don’t know my name and more importantly, my drink order. In the fall of 2008, when our economy fell into freefall, I began to notice that the morning lineup for coffee had begun to get shorter and shorter. It seemed to disappear altogether about the same time that economists now say that the economy had hit rock bottom. By the spring of 2009, I could breeze through the coffee shop’s front door and walk right up to the register unimpeded. The manager, Aaron, and his two latté ladies would all be waiting to attend to my order. It was both frighteningly surreal and yet somehow compelling too.
In the intervening months what was once just wishful thinking has now grown into a reality. This morning’s visit to my Starbucks, had today’s Starbucks Index showing clear indications of a recovering economy. To add icing to this already baked in the cake economic indicator, the Perma-Bear had a similar experience at his local Starbucks. We both experienced parking difficulties, due to the burgeoning crowds of patrons and our parallel morning coffee rituals took both of us longer than normal to perform.
In way of researching this post, I typed “Starbuck Index” into Google. I got hits on three notable business news outlets, The Economist, CNBC and the Wall Street Journal. The Economist’s Starbuck Index dated from 2004, so had nothing to do with the recession, but instead dealt with international exchange rates as reflected in the price of a latté. CNBC’s index was postulated at the beginning of the recession, as was mine, but they never went any further with it. The Journal’s Starbuck Index used anonymous credit card data to track the Average Dollar Transaction Amount or how much someone was willing to pay for a cup of joe. Their article showed that this transaction amount followed the same trends as Non-Farm Payroll Dollars or how much working people earned, for the last two years. Their graphed index even showed spikes in the last two year’s Decembers. Does a Starbuck Index require a seasonal adjustment?
The Perma-Bear later pointed out that an index that tracked average dollar amounts could be skewed during the holiday shopping season by the purchase of gifts. Looking down at my Starbucks’ shopping bag with two pounds of Holiday Blend in it, I had to agree with him. Some economists might point to events like the Dow’s 350+ point climb in the last two days as an encouraging sign, but I’ll just stick with my Starbucks Index and continue to count heads in line at the local Starbucks, besides the coffee is better there than at work.