Gotch-a

  By Guest Blogger Doug Rowat

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Last week, we finally got what we were all expecting: a quarterly US GDP report that sucked.

US first quarter GDP declined 0.3%, the weakest growth rate in three years and well below consensus expectations. A flood of imports and less government spending contributed to the decline. The US now only needs one more quarter like this and, just like that, it will have officially sunk into a technical recession.

However, we won’t get that second quarter GDP release until the end of July. In the meantime, are there other, less conventional, indicators that are telling us that the US may already be in recession?

Indeed there are.

The first indicator comes from one of my own associates. When I told him I was writing a blog on unusual recession indicators, he jokingly told me to use the “support-staff-bringing-sandwiches-from-home indicator”, meaning that he’s making his lunch more often to save money ahead of an economic downturn. (I assured him that his job was secure.)

Another completely unscientific recession indicator:

The lousy US economy has caught The New Yorker’s attention

Source: The New Yorker

Given that The New Yorker focuses almost exclusively on arts, politics and culture—not the economy—the unusual appearance of this article might itself be a recession indicator. If The New Yorker’s noticing problems in the US economy then a recession must be near.

But there’s more.

How about the Tooth Fairy Index? This is an index created by dental-benefits provider Delta Dental. Since the late 1990s, Delta has conducted a poll asking Americans to put a value on a single tooth left for the tooth fairy. Concerningly, the tooth fairy’s leaving a lot less mula under the pillow lately and the Index is rolling over. The February Index reading (the latest available) revealed that the average value of a lost tooth during the past year declined by 14% from US$5.84 to US$5.01. According to Delta Dental, “this marks one of the most significant year-over-year declines in Tooth Fairy giving since the poll’s inception.” And that’s the February reading. One can only imagine what the next survey will show.

Let’s also not overlook the men’s underwear indicator. The theory here is that when tougher economic times are coming, men will hang on to their underwear longer, delaying new tighty whitie purchases. While there’s not a regularly updated men’s underwear index per se, I do highlight that Hanesbrands and Philips-Van Heusen, two of the world’s biggest men’s underwear manufacturers, have seen their stock prices plummet this year. Again, highly concerning for the US economy (and, for that matter, concerning for men’s spouses everywhere).

Men’s underwear giants Hanesbrands and Philips-Van Heusen: gotch isn’t having a good year.

Source: Google Finance

Finally, let’s end on a non-traditional indicator that has more serious predictive value for the US economy: cardboard box demand. Is there any US industry that doesn’t require cardboard boxes for at least some of its supply-chain needs? Bank of America Securities conducts regular surveys of corrugated box converters (the guys that take corrugated board and convert it into ready-to-assemble cardboard boxes) and BofA’s latest survey doesn’t paint a pretty picture: 48% of respondents said that demand is worse than three months ago, up from ZERO percent who said the same in November:

Bank of America corrugated box converter survey: demand sentiment past 3 months

Source: Packaging Dive, Turner Investments

I argued last post that negative data may actually be good for equity markets as investors may view lousy numbers positively as they pressure Trump to back off on his global trade war. The negative GDP data from last week seems to support this thesis, at least in the short term, as the S&P 500 is actually higher since the report was released.

However, while possible tariff easing may be helpful for equity markets, it’s probably already too late for the US economy. A recession now seems inevitable. Both the traditional indicators and the oddball indicators are saying so.

Like old underwear, the holes in the American economy are clearly showing.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

Source: https://www.greaterfool.ca/2025/05/10/gotch-a/