Economic Indicators for Dummies

Dear reader, Are you tired of the delays in the publication of official economic statistics? Do you feel a desperate urge to measure the magnitude of the economic crisis? We...

FilesDear reader,

Are you tired of the delays in the publication of official economic statistics?

Do you feel a desperate urge to measure the magnitude of the economic crisis?

We bring you the solution. Here are our tips on how to create your very own set of economic indicators.

  • Step 1: define what you want to measure. Inflation and scarcity seem to be pretty popular these days, but why stop there? You could also measure, for example, the levels of commercial activity.
  • Step 2: choose your benchmark. It can be in monetary terms, in the amount of goods and services, hours. The rule here is to be creative, and arbitrary at the same time. You should choose a benchmark that is accurate and offers consistent information over time; credible, so we can rely on the validity of the information; and easy to interpret. Go out on a limb – it’s not like there are official statistics out there to contradict any claim you make. Your educated guess is as good as anybody’s.
  • Step 3: register the variations on a weekly or monthly basis.
  • Step 4: Voilà! You have created your very own economic indicator. Now you can show it off to your friends. Or you can sell it to bond investors.

Here are some DIY economic indicators you can begin building today:

Inflation

  • The price of a certain product. Try to choose a specific brand, so that you can control for variations. Fast food joints are a good choice. You could choose the price of the McDonalds french fries… No fries? Maybe that should go in a different index, or maybe you can use the yuquitas instead.
  • The amount of product you can buy with a BsF 100 bill. It should be the same product and brand overtime. Chucherías in the kiosk in front of your office are always an easy pick.

Scarcity

  • Number of supermarkets or drug stores you have to visit in order to find a specific product. It’s equivalent to the number of times you’re told no hay.
  • Number of supermarkets or drug stores you need to visit to restock on groceries.
  • Number of empty shelves in a supermarket or drug store. Try to pick shelves of a specific product. If the shelves are filled with a different products, you should register it as empty. For example, if the shampoo shelf is filled with mouth wash, then it’s empty.
  • Number of different brands of the same product. This is more of a diversity indicator, but valid nonetheless.

Level of commercial activity

  • Hours of operation of commercial premises: if they open later and close earlier; or if they open at all. This should be registered on a daily basis.
  • Number of closed santa marías, the metal protection screens for display windows. You can choose a street you have to cross to get to work or a floor of a specific mall you like to visit regularly

If you don’t have the time (or discipline) to build your own economic indicators, you can always identify “signals” of economic instability. The signals are less precise, but valid nonetheless. For example,

  • The length of the lines outside supermarkets are a clear sign of scarcity or that the Ariel or milk have arrived. In the case of drug stores, maybe it’s because the shampoo or diapers just came in.
  • The level of boredom (don’t confuse with poor service or clumsiness) of the shop clerk tends to be correlated to the number of hours doing pretty much nothing, so it can be used as a sign of low commercial activity.
  • The number of items missing from the menus in your favorite restaurant. For example, it’s pretty sad when you get the “we don’t have anything with chicken or beef.”
  • When restaurants have plastic menus with prices written with markers so they’re easier to adjust.
  • When you spot a car dealer that is completely empty. (Um, that would be all car dealers in Venezuela)
  • Having to resort to bartering.

Many are already using their own DIY economic indicators. Our favorite one is the Rotisserie Chicken Index:

If you have already created your very own economic indicator, share it with us in the comments section below.

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