Rocket Fuel Newsletter – The Fed holds course while unique indicators may provide economic insight

This week, markets seem to have calmed down a bit, and people are becoming more certain about the increased level of uncertainty we’re facing as world leaders negotiate on the terms of trade.

We’ve got Powell’s words of stability, consumer spending, and intuitive economic indicators like lipstick and underwear trends.

Fuel up! 🚀

Powell plots a steady course

“Life moves pretty fast. – Ferris Bueller”
– Jerome Powell

Fed Chair Jerome Powell is known for his “central bank speak,” which can be characterized by intelligent yet straightforward and cautiously worded prepared statements, and the way he pauses and processes to ensure his answer to a question is well-thought through.

Here’s some key takeaways from his first speech at the Economic Club of Chicago since he took the post of Fed Chair 7 years ago.

Impact of tariffs: Wait and see
Fed’s dual mandate: Maximum employment and price stability
We are moving away, or at least not making any progress on, those goals this year
It’s important to keep long-term inflation expectations anchored
THINK 2%

Retail sales bump – calm before the storm?

In this trusty publication, we’ve been tracking and pointing your analytical mind toward the retail sales report for quite some time. In a country where 70% of our GDP comes from consumption, the health of the consumer is paramount.

We’ve seen the consumer weather the first inflation storm from COVID, consistently asking ourselves if their budgets, and credit card limits, could continue to stretch.

Although economists were slightly surprised at how strong the retail sales report came in this month, could it simply show people buying their new iPhones before tariffs allow Apple to justify raising their prices further?

Beyond the yield curve: Unconventional economic indicators

When it comes to tracking the health of the economy, experts often turn to dependable indicators. A classic example is the inverted yield curve, which has preceded nearly every U.S. recession since 1955. Another example is the unemployment rate, which tends to increase as consumer spending decreases. Then there’s GDP growth, inflation, and consumer sentiment, which are all data points that analysts scrutinize to gauge what’s ahead.

However, beyond these traditional markers of economic health lies a whole world of unconventional economic indicators. While these quirky and sometimes surprisingly insightful trends don’t tend to appear in official reports, they often reflect observable changes in consumer behavior and sentiment. They may not be on track to replace the Federal Reserve's economic dashboard anytime soon, but they’re fun, fascinating, and – occasionally – eerily accurate.

The Hemline Index

This economic marker was originally proposed in the 1920s and suggests that skirt lengths rise during economic booms and fall during downturns. The theory states that when times are good, fashion is bold; when they’re not, hemlines get more conservative. The Hemline Index may not follow the scientific method, but it's nonetheless a whimsical reminder of how cultural trends and economic sentiment can mirror one another.

Men’s Underwear Index

Another popular unconventional economic indicator is the Men’s Underwear Index, coined by former Fed Chair Alan Greenspan. The idea is that men’s underwear is a necessity with relatively stable sales, so when those sales drop, it may signal that consumers are cutting back on even the basics. Although it’s subtle, historically, it’s tracked surprisingly well with downturns.

The Lipstick Index

The Lipstick Index suggests a similar principle. During recessions, people may shy away from big-ticket spending but still indulge in small luxuries and little treats, like a new lipstick or nail polish. And this goes beyond vanity – these little purchases can offer a sense of control, confidence, or normalcy in uncertain times.

Google Trends

In the digital age, Google Trends has increasingly provided astute economic insights. Analysts have tracked boosts in search terms like “unemployment benefits,” “discount codes,” or “pawn shops” as early warning signs of economic stress. On the other hand, spikes in searches for “luxury vacations” or “home renovations” might suggest rising confidence.

Used Car Index

One indicator that's gained traction in recent years is the Used Car Index. Not to be confused with standard auto sales data, this indicator looks specifically at price movements in the used car market. These shifts in the market can be a surprisingly responsive reflection of inflation, supply chain bottlenecks, and shifting consumer priorities. During the pandemic, for example, used car prices skyrocketed and became a key piece of the broader inflation story.

Halloween Spending

For something more seasonal, we can look at Halloween spending. According to the National Retail Federation, how much people are willing to spend on costumes, decorations, and candy can reflect consumer confidence heading into the holiday season. When households feel good about their financial outlook, they’re more likely to splurge.

So which indicators actually matter? History suggests that the most reliable signals still come from the classics: yield curve inversions, sustained changes in consumer spending, shifts in employment, and corporate earnings reports. That said, the unusual indicators can offer early hints or, at the very least, spark fresh conversations about how economics shows up in everyday life.

After all, the economy isn’t just numbers – it’s people. And sometimes, their shopping carts, skirt lengths, or Halloween plans might be saying more than we think.