Plenty of people have levied theories about potential recession indicators across the economy this year. But what if the key to finding the right economic indicator is to stop thinking outside the box and to start thinking about the box itself.
Virginia Tech economist Jadrian Wooten believes that the so-called cardboard box index may carry with it a warning sign for today.
“Once used by former Federal Reserve Chairman Alan Greenspan, the metric gauges the production of corrugated cardboard boxes — in which more than 75% of all non-durable goods are shipped — to presage the upcoming packaging and shipping demands of the economy,” says Wooten.
Amid recent cuts, U.S. box makers have scaled back operations, with 9% of domestic production capacity set to shut down. Wooten says that will put thousands of workers out of jobs, and is the biggest such pullback since the Great Recession of 2008.
“If we’re to assume that cardboard boxes are a leading indicator, it could be a bad sign of what’s ahead,” he says. “If they’re cutting back on capacity, it likely comes as a response to fewer orders. That would suggest weaker demand in the broader economy. If shipments keep falling, other indicators like GDP or unemployment may eventually catch up.”
While no single statistic is foolproof when trying to make broader predictions, this could be a leading indicator of where the consumer economy is headed. You can read Wooten’s full take on this topic in his newsletter, the Monday Morning Economist, which can be accessed on the web at https://shorturl.at/3TTvx.
