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Australians sniff at muffins sales to gauge recession
Australians are anxious to know if they will avoid recession and are turning to some unexpected, unofficial economic indicators to find answers.
- Reuters
- Published: 23:29 November 17, 2008
Sydney: Australians are anxious to know if they will avoid recession and are turning to some unexpected, unofficial economic indicators to find answers.
Unconvinced by official data, which are sending mixed and sometimes dubious signals, pundits are instead turning to everything from muffin sales to home-brewing kits.
Even economists and the central bank are being forced to play private detective and rummage through the rubbish bin of economics in search of important clues.
"We look at everything," said Craig James, chief economist at brokerage CommSec.
"You need to paint a picture of the economy and you do that by looking at all the available indicators."
Economists spend most of their time analysing official data, ranging from retail sales to job statistics, but they also rely on the street to tell them if the figures are lying.
Right now, the street is confirming that Asia Pacific's star developed economy is slowing sharply but suggests that it is still weathering the global storm fairly well, at least for now.
The gloomier alternative indicators include reports that corporate Christmas parties are being cancelled and, in a very dark sign, more Australians are brewing their own beer at home.
Newspapers report daily on big job losses and are themselves leavened with fewer job ads, while shop windows on the high street are plastered with "sale" signs.
But the real harbinger of recession - known as the "muffin effect" in alternative Australian economic theory - is far from conclusive. Muffin sales appear to be holding up.
Advocates of "the muffin effect", as it was dubbed by the Australian Financial Review recently, believe that when the economy slams into reverse, office commuters deny themselves their usual muffin with their morning cup of coffee.
Anecdotes
"We are selling the muffins with the coffees," said Matthew Burke, owner of Prima Vera coffee shop in downtown Sydney, as office workers queued to place orders.
"I don't think we have noticed the flow-on into the real economy yet. People are still getting their pay packets. But it will definitely start to affect us if people lose their jobs."
Anecdotes and alternative indicators like the "muffin effect" are gaining ground as doubts grow over some of the official data produced by the state Australian Bureau of Statistics.
Less releiable
Budget cuts have forced the bureau to cut the size of sample surveys for its flagship series, retail sales and employment, at a critical time. Economists say the results can be more volatile and therefore less reliable.
Private surveys can also be difficult to fathom: one survey showed business confidence hitting a record low in October while another showed consumer confidence picking up in November.
Even the Reserve Bank of Australia, the central bank, is looking increasingly at anecdotal evidence to ensure its stays ahead of the curve at times of economic upheaval. In 2001, it set up a special liaison team which keeps in touch with more than 1,500 business contacts across the country.
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