As regular readers are no doubt aware, we like to check in on the hookers from time to time.
By that we of course mean SouthBay Research’s Vice Index, which tracks spending on fun activities in the cash economy.
Fun activities like boozing, gambling, and escort hiring. “Luxury good spending is sensitive to shifts in the economic winds, vice is even more so,” Andrew Zatlin reminds us. “A prostitute costs almost two days of after-tax wages [and] the consumer’s stack of money has to be a certain height before they can get on that ride.”
That’s right. You don’t want to “get on that ride” if your funds are low and so, Zatlin likes to pitch the index as a leading indicator for consumer spending. Below, find his latest including an up to date reading on the Vice Index and the second annual Hookernomics Survey.
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Vice spending is coasting
Although the pace of Vice Spending appears to have surged starting mid-2014, that’s really a quirk of the 2013 comparables. In reality, spending has been growing at a steady, flat 2% pace. It corresponds to Retail Spending (ex auto & gas) y/y rate of 3.5%.
Results from our 2nd annual Hookernomics Economic Survey
- The Good News: Inflation & income growth expectations remain subdued.
- The Bad News: Income growth expectations are subdued.
NOTE: This survey was conducted in early January. Any impact from a stock market collapse is probably not reflected.
The Hookernomics Survey follows the Federal Reserve Regional Bank Business Outlook Surveys. Business owners (escorts) are asked their opinions about current and 6 month business conditions. The questions focus on similar topics: Prices, Costs, New Orders, and Inventory.
Last year’s survey results: No inflation, continued steady-as-she-goes economy
Last year respondents reported that there was no change in demand or activity. Customer demand was the same, indicating no meaningful or anticipated change in incomes beyond normal raises.
This year, Same as Last Year: No inflation, continued steady-as-she-goes economy
Inflation still tame:
- Are your costs rising? Somewhat
- Do you expect prices to increase in the next 6 months? No
- Do you expect to raise prices in the next 6 months? No
Escorts raised prices in 2015, largely in response to several years of rising hotel costs. What began as tentative rate hikes turned into widely adopted increases.
Hotel inflation remains a sore spot.
Hotel prices continue to trickle up and apparently the Priceline bargains are less of a bargain than they used to be. So here comes AirBnB: many escorts have begun using it as a viable alternative.
However, having raised rates relatively recently, respondents reported no plans for a repeat.
Customer demand remains steady
- Has demand changed (number of clients, frequency of appointments, etc)? Do you expect demand to change? No increase or decrease in demand
- Is there a change to amount of money spent per transaction? No
This is a very price elastic market. The only reason price hikes held last year was that all escorts raised their prices; customers had little choice. But it’s also a testimony to income growth: customers had the available disposable income.
That trend continues this year: no deceleration in consumption points to continued expectations of job security.
But that’s also a problem: no extra spending suggests that customer don’t expect much in the way of higher disposable incomes. And that’s before the stock market collapse is taking hold.
Inventory remains steady
- Are you encountering any increase or decrease in competition? No
- Do you believe that the number of other escorts is the same, more or less? Same
There are essentially no barriers to entry. That means that in times of economic stress, more providers can easily enter the market.
Or, put differently, no changes in the volume of providers indicates no change in the economy.
That’s a big difference to early last year when many providers and adult film stars were travelling to boost business.
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Of course all of this may not matter.
If central banks end up heeding the "ban cash" calls on the way to developing a government-sponsored digital currency that allows PhD economists to take away citizens' econommic autonomy and institute deeply negative rates the cash economy may simply die out.
Unless the hookers start taking Visa, that is.