Indicators of an economy: tractors, concrete, imported cars, length of a ladder etc.

I’ve always been on the lookout for different economic indicators not just GDP per capita. One which (literally) caught my eye was the size of Alan Greenspan’s (former US Fed Chair) briefcase before a US Fed interest rate decision. – thin = happy with the economy maybe interest rates down – fat = concerns with the economy maybe interest rates up.

Another was the length of the length of a ladder a pilot has to climb on container ships.

A long climb up the ladder signifies that the ship is high in the water and exports are correspondingly low. A short climb up the ladder signifies that the ship is low in the water and exports are correspondingly high.

Tony Alexander – former BNZ Chief Economist – used to say that one of the best indicators of the New Zealand economy was new tractor registrations. Within an advanced agricultural base, tractors form a crucial part of the production process and has played a significant role in the increase in productivity in New Zealand since the removal of subsidies. Looking at the number of new tractor registrations there was a significant fall in the post subsidy period of 1984 – 1988 where the number fell from 2,218 to 711 respectively. This reflected the elimination of concessionary farm loans, price supports, low-interest loans, disaster relief, weed eradication subsidies and special training programmes to get them through the hard times.

David McWilliams (I thoroughly recommend his podcast and recent book ‘Money’) whilst working at the Irish Central Bank in Dublin was calculating the GDP forecast for the Irish economy using all sorts of formulae when a senior economist told him to look out the window at the number of cranes in the skyline as that will give you an idea of what is going on in the Irish economy.

More recently I came across a post on Linkedin by Shamubeel Eaqub, economist at Simplicity. As well as new tractor registrations he looks at sales of used cars and cement and produced a chart to show the trends since 2000.

Readymix concrete – indicator of construction activity. It is currently not that far off the lows of the GFC. But there are some encouraging signs of a bottom on leading indicators like building consents.

Imports of cars – good indicator of household spending. More cars purchased when people’s finances are healthy.

New tractor registrations – indicator of primary sector. Sales are picking up with high international commodity prices, a weak NZD exchange rate, and good growing conditions. However fertiliser sales have eased off after a rebound. Sentiment turns faster than decisions to hire and invest. The real parts of the economy takes months and quarters to turn.

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