TLP: What It Really Means When You Spend $4 On A Latte
Unemployment numbers, capital investment figures and housing starts may mean something about where the economy is headed. But those are fucking boring statistics. Instead, check the length of the line at Starbucks.
As economists look for clues on the direction of consumer spending, they may want to look into how much Americans are willing to spend on their coffee.Or maybe people are so depressed by the way things are in this economy that the last thing they want first thing in the morning is a shitty cup of coffee.
Consumers have been more willing to spend since the lows of the recession, but recent declines in retail sales and confidence have sparked worries over whether spending can continue to grow in the second half of the year.
Enter the coffee indicator. A “tell-tale sign of how consumers feel about employment, income and the future is where they buy their coffee and whether they step up for the more expensive concoction,” wrote Majestic Research economist Steve Blitz in a recent research note.
Majestic Research tracks anonymous credit-card data, and can see how much consumers spend by category and store. Blitz broke out the average dollar transactions at Starbucks and Dunkin’ Donuts. The data show that during the worst of the recession consumers spent less at the two coffee outlets, but as the employment picture started to improve people were willing to spend more per transaction.