Back in the days before the Internet, and before there were countless social media economic experts as well as the genuine kind, I used to regularly monitor the health and wealth of the Philippine economy at the Tejeros Market on Pasong Tirad, Makati.
Our suki pork dealer had more economic perspective then—and probably still does—than anyone in a skyscraper office in Makati or BGC.
The husband with one son would arrive at the abattoir from Batangas long before sunrise, and the swine would then be butchered into retail cuts at the palengke by six. The “Pork Lady” had good insights into the economy, as does every small business owner, by the amount and type of cuts of pork that did not sell. Further, a small business adjusts quickly to both positive and negative economic changes as “boom and bust” cycles determined the size of the hog the husband would buy from the piggery.
The “newest” economic theory in the past two years is “Revenge”: Revenge Shopping, Revenge Travel, Revenge Buying. It comes from the 1980s Chinese phrase “bàofù xìng xiāofèi.”
During the past two years I have been seeing at the malls (what’s the opposite of revenge? Mercy?) store closings. Many businesses that were marginally successful have died. I said late in 2022 that there would be many previously successful businesses, even some that quickly reopened after the lockdowns, which would eventually close their doors forever. Knowing that they would earn no net profit for two or maybe more years to make up for the losses of 2020-2021, they would shut down and move on.
There are many ways of measuring an economy. However, these are not always able to accurately evaluate economic activity when there has been a shift in consumer habits. For the last six months I have observed —for whatever it is worth—a slow increase in foot traffic at every mall that I regularly visit. In my experience, in 2023 we have gone from “empty” to “back to normal.” But that does not give a complete picture.
I can never find a seat at a mall coffee shop and mall restaurants from fast food to casual dining are often waiting-line full. But the department stores seem empty. The only genuine indicator of business is not the warm bodies roaming the floor but how many cashiers are on duty. Are we only seeing “Revenge Eating” or has there been a shift in purchasing patterns? My wife and I seem to be the only ones in our family that still actually go “shopping.” Our sons are buying almost everything online, from clothes and shoes to vitamins and shampoo. We have dog food and cat litter delivered, as well as peanut butter and beer. With these in mind, what will be the overall effect on employment? Will the economy grow even as employment stagnates? What will be the effect on businesses as “online” is more profitable? How will malls adjust to these buying changes? How will we be able to quickly and effectively measure the impact on a macro-economic basis?
Economic observers, if not economists themselves, are developing new and non-traditional ways to measure the economy. Bloomberg uses the “Subdial Watch Index” that tracks prices for the 50 most-traded luxury watches by value on the secondary market. Subdial lists watches from $1,500 to $350,000.Prices for pre-owned watches have fallen by about 26 percent in a year, the Subdial Index shows. Watch buying activity can be used as a barometer of middle-income spending habits. If consumers have more money, they will increase purchases of discretionary items like wristwatches. The “Diamond Index” from the International Diamond Exchange, since the peak in March 2022, has fallen 24 percent to pre-pandemic levels. “Another middle-class spending barometer flashes red: Rolex prices near two-year low. Mid-tier consumers are dialing back spending on luxury goods.”
What are the mid-tier discretionary consumer spending habits in the Philippines that we should be monitoring?
Economics is all individually personal. “An economic recession is when your neighbor loses his job. A depression is when you lose your job.” But government and corporate policies and plans need to be rooted in more defined terms. That has become more difficult in an environment, both globally and locally, that is in the midst of great changes.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.