There are all kinds of pricing indicators that have surfaced over the years to help us gauge the economy and determine how we are doing financially. Normally, pricing trends are measured for modern wholesale markets, manufacturing industries and commodities markets by what is known as the Producer Price Index (PPI).
The PPI is the international industry standard for communicating pricing fluctuations and, more importantly, pricing and economic trends. Then there is something called the Purchasing Power Parity (PPP), which is an economic theory and a technique used to determine the relative value of currencies.
When one wishes to understand these pricing trends and/or changes in relative currency values as concerns modern wholesale markets, manufacturing industries and commodities markets, it’s the PPI and PPP that can answer the big questions. But what about the guy on the street? You know, the average ‘Joe Consumer’ who might be your neighbour, friend or co-worker. Just how does he or she really know how things are going in their economy and the financial condition of their geographic area? Many in our society and throughout the world are unable to decipher or apply such concepts as the PPI or PPP. Most simply have such questions as: Are things getting better? Are things getting worse? And just how bad is it?
So how can we simplify economics to a level that the average person can understand and appreciate?
Well nearly 30 years ago a clever American pricing standard known as the Big Mac Index (BMI) was introduced in The Economist magazine. The parody by Pam Woodall was a tongue-in-cheek illustration that was so well received that the prestigious magazine has reprinted an updated version every year since. You may not have heard of Pam Woodall, but I’ll bet you’ve heard of her ‘Burgernomics’!
Thailand has its own pricing index parody introduced by Achara Deboonme, editor of The Nation newspaper.
According to Achara’s version of the Big Mac Index, the average price of a Big Mac in America in July 2013 was US $4.56, while in Thailand it was 89 baht–or $2.85 at the exchange rate of 31.27 per dollar at that time; the BMI suggested that the Thai baht was undervalued by 37.5 per cent.
Achara realised that the BMI allows economists the world over to easily compare international currencies and their relative strengths, thus pointing out the strengths and weaknesses of purchasing powers from one country to the next by the price of a Big Mac hamburger in local currencies. Taking the concept to the next level in Thailand, Achara devised her own clever insight into pricing parity within the Kingdom, calling it the Isaan SomTam Index (ISI).
Her new metric in determining the purchasing power parity of the Thai people is based on the price of somtam, known to most foreigners as papaya salad. Using the BMI or ‘Big Mac Index’ formula to compare the price of somtam in each province of Thailand, Achara determined that the cost of living in Phuket was the highest in the country.
Yes, economically things are getting tough almost everywhere with almost no country unaffected.
Having said that, according to the Associated Press (AP), we recently witnessed a shocking American newspaper headline, ‘The burger chain that put “supersize” into the American vernacular is slimming down: For the first time in more than 40 years, and perhaps ever, McDonald’s says the number of U.S. restaurants it has is shrinking’.
Now that is a pricing reference that anyone can understand and relate to in America, but what about Thailand?
The popularity of a burger in America is about equivalent to a bowl of noodle soup in Thailand and recently Thailand witnessed its own shocking newspaper headline: Mama brand instant noodles sales drop for the first time in 42 years.The article went on to say that sales of Mama brand instant noodles dropped 0.3 percent in the first four months of this year, the first decline ever in the company’s 42 years.
Now that’s an economic indicator that everyone here–rich or poor–can understand and relate to.
Pam Woodall’s Big Mac Index and Achara Deboonme’s Isaan SomTam Index demonstrate that there are easier and less confusing methods to measure the state of local economies.
Well, I have come up with his own economic indicator: the SBI – better known as the Sign Board Indicator. I have been researching this formula for many months now as I drive back and forth to Bangkok a couple of times every month and I have determined without a doubt that the Thai economy is not going in the right direction yet and has not yet hit bottom either.
On June 15 as I drove past the last 40 sign boards on the Motorway (Highway 7) before reaching Pattaya, I counted 19 that were blank. That represents an SBI Indicator of 47.5 percent. That’s right, nearly half the signboards were completely empty.
If that is not sure indication of our current economic situation I don’t know what is.
So, the next time you find yourself driving down the motorway to or from Bangkok and happen to ask yourself ‘Just How Bad is the Economy’……just start counting those empty sign boards and calculate Clayton Wade’s Sign Board Index ’(SBI) and you will have a pretty good idea just how bad the Thailand economy is.
This column was written by Clayton Wade, Managing Director of Premier Homes Real Estate, one the Eastern Seaboard’s leaders in exclusive property sales and rentals, and Managing Director of Premier Land and Development Co., Ltd. A real estate veteran of close to 30 years, the last 19 of which have been in Thailand, Wade is well known throughout the Asia-Pacific region for his public speaking and television presentations as well as having written regularly for numerous media outlets. [email protected].
