Red meat recession

The offbeat recession indicators on everyone’s mind.
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Francis Scialabba

· 5 min read

Sure, recessions are officially declared by the National Bureau of Economic Research, but beef sales are shaping up to become the latest unofficial recession indicator.

Anecdotal recession indicators aren’t new; who could forget the classic hemline index, or the men’s underwear index? While we may not want to base major financial decisions on these seemingly random touchstones, we casually eye them for a reason: They’re noticeable in our day-to-day lives, jumping out at us from grocery store shelves.

So, what message, if any, can be gleaned from these unconventional economic benchmarks?

Depends on who’s looking: Some corporate leaders have noted that their usual problem-economy indicators are notably absent right now, while others are apprehensive about declining…steak sales?

Setting aside some of the old standbys (later, lipstick index), here are some of the offbeat recession indicators and economic red flags that have been discussed in recent earnings calls and other reports.

Red meat recession. For Costco CFO Richard Galanti, the state of the economy can be boiled down to beef.

On the company’s most recent earnings call, Galanti said that, based on previous trends, customers’ move away from beef and steak purchases could be a sign of a looming recession. At a bare minimum, it raised “concern” for a possible recession in his eyes.

“Historically, we’ve always seen, like within fresh protein, we’ve always seen when there’s a recession—whether it was ’99, ’00 or ’08, ’09, ’10—we would see some sales penetration shift from beef to poultry and pork,” he said. “We’ve seen some of that now.”

It’s worth noting, however, that higher beef prices were already expected in 2023 due to the lowest cattle inventory in 61 years. And as grocery-store sticker shock continues, some consumers are cutting costs where they can.

And there’s another potential culprit: the growth of the alternative meat market. It’s possible customers are steering clear from expensive cuts of meat for totally different reasons—although maybe not at Costco. The retailer was relatively late to the alternative meat game: Costco only started adding Beyond Meat products to its inventory in select stores this January.

Thinking inside the box. There’s one unconventional recession indicator that’s not likely to fold (please say you get it) anytime soon: cardboard boxes.

The US is currently in a “cardboard box recession,” according to Jeffrey Kleintop, chief global investment strategist at Charles Schwab.

The logic’s straightforward: Demand for corrugated cardboard is tracking downward, and that’s what cardboard boxes are typically made of. And what do cardboard boxes hold? Goods that are manufactured and traded. And—oh, would you look at that!—which two industries seem to be in a global recession right now? Manufacturing and trade, per Schwab analysis.

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In Kleintop’s eyes, the cardboard box recession explains why certain industries are turning down, while others stay solid. At least in past recessions, the trend has held true, according to data from the Fibre Box Association that Schwab analyzed.

Under the weather. When it rains, it pours: A growing number of companies have called out inclement weather and natural disasters in recent earnings reports, some notably citing California floods in the early spring as a contributing factor to poor results.

Home Depot, which reported its biggest sales decline since 2009, put at least some of the blame on bad weather. During its latest earnings call, CEO Ted Decker said the company’s lower-than-expected sales were “primarily driven by lumber deflation and unfavorable weather,” with California floods “disproportionately” impacting the company’s results. Home Depot competitor Lowe’s also cited bad weather as it cut its full-year outlook in May.

It wasn’t just home improvement chains: Casino operator Bally’s Corporation saw flooding in Lake Tahoe and tornadoes in Evansville, Indiana, negatively impact earnings. And amusement park operator Cedar Fair Entertainment Company said its disappointing first quarter results were “directly attributable to the worst period of weather we’ve experienced in several decades at our California parks.”

Not shrimp-ing on expenses. One-item economic indicators may oversimplify things, but maybe that’s OK when they offer up some otherwise interesting insight. Case in point? Corporate spending on group gatherings seems to be holding steady. How can you tell? Shrimp, apparently.

That’s what Peter Strebel, chairman of Omni Hotels & Resorts, recently explained to Bloomberg, based on what he’s seen in the past.

“When business is good and corporations want to spend money at their cocktail parties, they always add raw bars: shrimp, crab, oysters, clams,” Strebel said. And if you follow the shrimp, the economy’s not going south right now, he added. If things were bad, “you’re not doing a shrimp bar. You’re doing cheese, fruit, and crudités,” he explained.

For the time being, “people are still buying shrimp,” he added—and maybe that’s as good of an indicator as anything. Not such a good indicator if you’re a shrimp, of course.

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CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.