Economic Indicators: The Diaper Rash Revelation

Economists and central bankers spend most of their time poring over data they hope will provide insights into the direction of market forces. Most of the time they fail. Peter Lynch, the legendary mutual fund manager and investment guru always advised that one should look at the products one sees in every day life and use those insights to make decisions about economic trends.

In that spirit, Gus Lubin reports in Business Insider of a convincing but uncomfortable new observation. The indicator is baby diaper sales. Hold your nose, literally and figuratively. JL:

American parents spend $1,500 per baby on diapering each year, changing a diaper 6.3 times in a day, according to Procter & Gamble.

In a recession, unfortunately, diapering is one of the first costs that households cut. Diaper rationing is showing up in rising sales of diaper rash cream -- even in a period when the baby population decreased.

The number of babies ages 2 and under in the U.S. fell about 3% to 8.1 million last year, based on data from the U.S. Centers for Disease Control, which tracks the number of live births. Yet SymphonyIRI data show unit sales of disposable diapers fell 9% in the 52 weeks ended Aug. 7, three times as fast as the population of infants. At the same time, unit sales of baby ointments and creams rose 2.8%, despite fewer babies.

Diaper rash doesn't rise to the level of concern that the CDC tracks cases, so sales of diaper-rash cream are one of the better barometers for tracking its frequency. And the trend of diaper-ointment sales rising even as diaper sales decline has been going on since 2009, according to SymphonyIRI data from Deutsche Bank. The disconnect between fewer diapers and more rash cream has intensified in the past year.