What Is the Men's Underwear Index?

Men’s Underwear Index is an unconventional economic indicator, long favored by former Fed Chair Alan Greenspan, which purports to measure how well the economy is doing based on the sales of men’s underwear. This measure suggests that declines in the sales of men’s underwear indicate a poor overall state of the economy, while upswings in underwear sales predict an improving economy.

Key Takeaways

  • The men's underwear index is an informal measure of the overall economy, and which was once favored by Fed Chair Alan Greenspan.
  • The theory goes that if underwear sales are rising, the economy must be improving; and vice-versa.
  • This is just one of several unconventional economic indicators that combine economic and folk theory in making predictions.

Understanding the Men's Underwear Index

Men’s Underwear Index is an economic indicator popularized by former Fed Chair Alan Greenspan, which suggests that the performance of an economy can be measured by looking at the sales of men’s underwear.

According to this theory, which Greenspan began promoting in the 1970s, an economy performing poorly will show decreasing sales in men’s underwear, while an improving economy will show an increase in underwear sales. The foundational assumption behind this theory is that men tend to view underwear as a necessity instead of a luxury item, meaning that product sales will remain steady, except during severe economic downturns.

Critics of this theory suggest that it may be inaccurate for several reasons, including the frequency with which women purchase underwear for men, and an assumed tendency for men not to purchase underwear until it is threadbare regardless of the performance of the economy.

Other Unconventional Economic Indicators

The Men’s Underwear Index is just one of a host of unconventional economic indicators that have been proposed since the advent of market tracking.

Some other Unconventional Economic Indicators that have been promoted include:

  1. Hemlines: First suggested in 1925 by George Taylor of the Wharton School of Business, the Hemline Index proposes that skirt hemlines are higher when the economy is performing better. For instance, short skirts were in vogue in the 1990s when the tech bubble was increasing.
  2. Haircuts: Paul Mitchell founder John Paul Dejoria suggests that during good economic times, customers will visit salons for haircuts every six weeks, while in bad times, haircut frequencies drop to every eight weeks.
  3. Dry-cleaning: Another favorite Greenspan theory, this indicator suggests that dry cleaning drops during bad economic times, as people only take clothes to the cleaners when they absolutely need to when budgets are tight.
  4. Fast food: Many analysts believe that during financial downturns, consumers are far more likely to purchase cheaper fast food options, while when the economy heads into an upswing, patrons are more likely to focus more on buying healthier food and eating in nicer restaurants.
  5. Lipstick: The leading lipstick indicator suggests that an increase in sales of small luxuries such as lipstick can indicate an oncoming recession or period of diminished consumer confidence. The premise is that consumers turn to less expensive indulgences, such as lipstick, when they do not feel confident about the economic future. The COVID-19 pandemic of 2020–2021 pandemic, however, changed beauty regimens enough that the usefulness of this indicator is in question.