A recessive economy is no match against the steaming morning luxury that fuels the pulse of the city. Consumers pinch their pockets for the morning Cup O’ Joe, even during economic strife, but the foam-topped coffee can get expensive overtime.

Folks that are willing to spend as much as $6 a day on a morning beverage is a curious concept in a struggling economy. Spending habits on coffee are inextricably linked to an established morning routine. Coffee drinkers are creatures of habit. The coffee drinker views the cup as an inseparable part of the daily ebb and flow of life. Coffee sales outside of the home skyrocketed in 2004, likely due to the success and popularity of popular corporate coffee houses. Coffee transformed from an in-home treat to a fast food experience.

Over the past decade coffee consumption outside the home has shown some reaction the the nation’s economy. In 2001, coffee consumption outside the home was in the low 30% range as the nation entered the economic recession. Ryan Sweet, a U.S. economist for Moody’s Analytics alludes that a low coffee consumption percent is directly correlated to a high unemployment rate. In 2004, when the U.S. unemployment picture turned around for the better, outside home coffee sales soared from 29% to 40%.

 

Coffee Consumption Outside of the Home

YEAR	2001	2002	2003	2004	2005
Outside Home	32%	34%	29%	40%	39%
Unemployment	4.7%	5.8%	6.0%	5.5%	5.1%
Economic Climate Backdrop	Recession	“Jobless Recovery”	” “	“Unemployment Improves”	” “

YEAR	2006	2007	2008	2009	2010	2011
Outside Home	40%	33%	36%	35%	30%	27%
Unemployment	4.6%	4.6%	5.8%	9.3%	9.6%	*9.1%
Economic Climate Backdrop	” “	Recession	” “	” “	“Jobless Recovery”	” “

*Seasonally adjusted unemployment rate for month of July from Bureau of Labor Statistics

Source: National Coffee Association of USA for coffee consumption in the home and outside of the home; Bureau of Labor Statistics for annual average unemployment rate figures; Economic climate backdrop Moody’s Analytics.

Via aol.news

According to one economist, however, coffee will only suffer in the most serious times, and is considered as necessary as the utility bills and automobile gas. Most coffee houses are doing as well as they ever have, and according to Verner Earls of Chauvin Coffee Company, some coffee houses have reported record sales. “People aren’t going to give up the latte,” claims Verner. “Bigger expenses will go first.” The mindset behind the consumption of coffee allows coffee houses to weather recessions well.

This general trend for coffee consumption does not leave all coffee houses safe. Many local shops struggle with a crunched economy, as well as corporate coffee chains being forced to close down stores. In 2008, during the heat of the recession, Starbucks Coffee announced it will close 600 stores across the United States, according to the New York Times. This move by Starbucks cost over 12,000 employees their jobs, the most in its history (via the New York Times).

The fall of Starbucks in 2008 reveals that java sales are a hot economic indicator of the state of the economy. As the dollar collapses, so does the average American’s spending power.

Coffee has become a fast food luxury treat, all of which its raw materials: sugar, coffee, milk, wheat, and chocolate are all skyrocketing in price due primarily to the fall of the dollar, according the the Huffington Post. This hike in prices causes the cup cost to steadily rise.

Coffee sales, specifically using the example of Starbucks Coffee establishments is a prime example of how a falling dollar will make something like coffee, an item that Americans gorge on, daily for that matter, too expensive to include in the morning ritual.

Speaking from experience, a trip to a coffee shop is an absolute treat that I enjoy frequently with my mom. So much so, that we budget our social coffee hour into our weekly expenses tough economy or not.

 

 

 

Sources:

http://www.riverfronttimes.com/foodblog/2009/04/01/java-enabled-is-coffee-recession-proof

http://archive.boston.com/lifestyle/food/articles/2011/12/14/in_a_weak_economy_buying_morning_coffee_is_a_small_reward/

http://www.aol.com/article/2011/08/11/is-coffee-the-new-leading-economic-indicator/20015519/

http://www.nytimes.com/2008/07/02/business/02sbux.html?_r=0

Economic Indicators: Beer

The world’s economy is constantly changing and while people commonly use economic indicators such as GDP, unemployment rates, etc. to gauge the economy, other surprising measures can be decently accurate. One interesting economic indicator is beer. When the economy is good beer consumption at restaurants and bars are relatively stable/high. However when the economy is slower, beer consumption also slows down. The reason for this shift is that when people have less spending money they generally go out to eat less and even when they do eat out they are less inclined to purchase drinks at dinner. Similarly people may frequent the bar less and if they do go to the bar they might drink before hand or purchase less drinks at the bar to save money. Instead they might purchase beer at a grocery store and drink it at home or forego drinking entirely. People are less likely to spend money are items that are not considered necessities. The consequences of declined beer consumption affects more than just bars and restaurants. It affects the waiters and waitresses at the bar and the breweries themselves. The waiters make less money and tips, which affects their purchasing power. The breweries may also earn less revenue due to decreased consumption. As a result they may slow down production and produce less beer. This could also have a domino effect on their employees if they no longer need as many workers to sustain the demand on their products. All these consequences also affect tax revenues. The government will not be able to collect as much tax revenues if less product/money is being earned.

 

Every two years a country from anywhere in the world is strategically chosen to host the Olympics. I say strategically because being given the honor to host the Olympics greatly effects a country’s reputation, residents, and, most importantly, its economy. Therefore, to account for this major event, economists at Bespoke Investment Group came up with the Olympic Indicator to measure the state of the economy during this exciting time.

The Olympic Indicator shows that markets tend to prosper during the Olympic games. Bespoke Investment Group explains this by saying that the excitement of the games distracts investors from problematic economic data and headlines. Bespoke confirmed this notion by tracking the Dow Jones performance during the Summer Olympics between the opening and closing ceremonies since 1900. Their results; positive returns in 18 of the last 26 games.

This summer in Rio de Janeiro marked the 31^st Summer Olympics. However, there were a lot of concerns leading up to the games on whether Rio could afford the Olympics, issues with their government and city safety, the presence of the Zika Virus, issues with severe water pollution and if the Olympic buildings were even going to be finished on time.

However, with all these problems, the U.S. economy still seemed to benefit from the games. By looking at the chart below it is evident that the Dow Jones Average spiked from 18.352.05 on August 4 to 18.543.53 on August 5, which was the day of the Opening Ceremonies in Rio. Although the average fluctuated during the Olympics, ever since August 21, the date of the Closing Ceremonies, the average is almost back at where it started on August 4.

Although the Dow Jones Average shows that the American stock market did improve during the 3 weeks of the Olympics, the Olympic Indicator does not actually prove that the games distract investors. Therefore, the economic growth that occurs during the Olympics can also be explained by looking at the money that is entering markets around the world. For example, NBC Universal paid $1.2 billion for the right to broadcast the Olympics in Rio, which is chump change to Rio’s estimated $12-20 billion they spent on hosting the games. All of this money promotes consumer spending and puts money into the economy that was not there before, which in turn, betters the economy.

Sources:

http://www.marketplace.org/2016/08/05/world/let-s-do-numbers-what-has-been-spent-rio-olympics

http://www.usatoday.com/story/sports/olympics/rio-2016/2016/05/12/impeachment-trial-set-rio-olympics/84275984/

http://www.marketplace.org/2016/08/05/world/let-s-do-numbers-what-has-been-spent-rio-olympics

 

As people become vulnerable with their pocketbooks, do they become vulnerable to loneliness as well? Statistics from online dating sites demonstrate that tough financial times correlates with higher numbers of people surfing the web for someone to commiserate their pain with.

These findings are supported by various online dating sight’s financial and user data. Match.com’s website traffic and quarterly results reported having the busiest site traffic during 2008’s turbulent financial crisis. They additionally reported their best fourth quarter in seven years during 2008, the same time as the Dow Jones reported a five-year low (HCPLive). This data differs from previous Novembers, which are notorious for being a particularly slow month for online dating sites.

According t0 Perfectmatch CEO Duane Dahl, the turbulent economic period after 9/11 and the end of the dotcom bubble led to a 200 percent membership increase. Dahl credits this hike in numbers to the public’s desire to find comfort in a partner, either to console their financial stresses or solve them. The poll, sponsored by eHarmony, shows that respondents those who said they felt stressed by the current economy were 14 percent more likely to aim to be in a long-term relationship within a year, compared with those who were not stressed by the economy (Time Magazine).

Though there are numerous potential explanations for this phenomena, off site dating experts have contributed them to 1) more time spent online and 2) loneliness heightened by stress. Theoretically, tougher economic times results in people staying home more often. This inevitably results in people spending more time on their computers, clicking away at their potential matches on online dating platforms. At only $35 a month, online dating is cheaper than blind dates as well, making it a more viable option for those on a budget. Whilst the public turns to online dating to find their next relationship, economists can turn to their membership numbers to determine the status of the economy.

Sources:

http://cityroom.blogs.nytimes.com/2009/05/04/how-has-the-recession-affected-your-dating-life/?_r=0

http://www.nytimes.com/2009/02/12/fashion/12dating.html?scp=1&sq=dating%20recession&st=cse

http://www.hcplive.com/physicians-money-digest/investing/bizarre-but-used-economic-indicators#sthash.MvcAoGhx.dpuf

http://content.time.com/time/business/article/0,8599,1868694,00.html

 

Since the early 2000s, several scientists have found that happiness can be used to predict the likelihood of developing coronary heart disease or even the strength of one’s immune system. Similarly, economists are finding happiness to be an effective indicator of the health of a country’s economy.

Based in its rich Buddhist heritage that stresses the accumulation of happiness over material goods, Bhutan was the first country to measure its economic might and societal wellbeing using the Gross National Happiness (GNH) instead of its more conventional cousin the Gross Domestic Product (GDP) in 1972.

A country’s GNH is a numeric value assigned based on nine categories: time use, living standards, good governance, psychological well-being, community vitality, culture, health, education, and ecology. The general of level of happiness in a population can indicate a high level of confidence in the economy which in turn increases consumer spending, a hallmark of a thriving financial system.

There is debate over what levels of happiness mean for economics and business cycles. Some economists claim that higher GNH indicates a stronger economy while others argue the exact opposite. The graph above indicates a decrease in happiness as growth begins to pick up, a trend that may be explained by greed. Perhaps as people become more successful, they develop an insatiable appetite for more wealth.

However, Gallup polling in over 150 countries from 2007 to 2013 found that as national happiness decreased and national suffering increased, nations become more unstable which decreases investor confidence sending shockwaves through the economy. The graph below demonstrates wealthier countries, generally nations with stronger economies, are more likely to be satisfied than their less wealthy counterparts. Similar to how high levels of dissatisfaction leads to instability, high levels of satisfaction can be seen as a reaction to and help perpetuate stability in markets by encouraging investors to invest and consumers to spend.

The Gross National Happiness is by no means a flawless indicator of economic strength. More than anything, it shifts national focus away from numbers to potentially more worthwhile and feasible gains. As we deplete natural resources at an ever-growing rate, focusing on achieving goals that emphasize positive emotions over material goods – especially when considering near stagnant economic growth in many industrialized nations – might be worth taking seriously.