If ever there was a symptom of the instant gratification meme of the new normal (why wait when you can have it all now?), it is 'vice'. That is why Southbay Research's Vice Index (composed of prices paid, volume, and frequency of sales in liquor sales, gambling, and prostitution) is so worrisome, as WSJ reports [6], "it's signalling that consumer spending growth is about to drop and stay subdued for a few months." Southbay's Zatlin notes that measuring this kind of discretionary spending provides a window into the true state of the economy - which fits with recent macro data on retail sales (and forecasts for the holiday season as hope of the 'second-half' recovery fade quietly into next year.
[7]
Via WSJ, [6]
Looks like it’s not going to be such a hot holiday season for liquor companies, casinos, and prostitutes – at least according to the latest reading of the “Vice Index.”
The index – a concoction from SouthBay Research’s Andrew Zatlin measures actual spending levels – yes, on vices – and uses the numbers to show where the economy is headed.
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“It’s signalling that consumer spending growth is about to drop and stay subdued for a few months,” he wrote in a note to clients.
The index measures spending on things like prostitution, liquor sales, and gambling; it measures prices paid, the volume and frequency of sales (Mr. Zatlin doesn’t disclose exactly how he tracks these). Measuring this kind of discretionary spending, he says, provides a window into the true state of the economy.
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The vice index seems to jibe with recent government data. The September retail sales report from the Census Bureau showed spending had slipped from August, and was up about 3% from a year ago. Along with recent reports on business spending, it all points to a pretty languid economy, and certainly not the “second-half recovery” that had been bandied about back in the spring.