The Jacobsen Leather Demand Index (JLDI)

The Jacobsen Leather Demand Index (JLDI)

The Jacobsen Leather Demand Index monitor’s was introduced to Jacobsen clients in March. The index was created to shed some light on the demand component within the hide and leather market. As mentioned in our first release, the leather market is similar to many commodity markets as it is fundamentally driven by both supply and demand. While supply of leather is generated from hides and is relatively transparent, demand for leather is more opaque, as it is a function of consumer demand for products that contain leather which include shoes, furniture along with the automobile upholstery and accessories.

 

To produce an index that reflect perceived demand for leather, the JLDI will combines changes in the shoes, furniture and automobile market given assumption made about the makeup of these markets as leather is concerned. Fluctuation in shoes sales, auto sales, and furniture sales will change the demand dynamic for leather globally. For example, above is a chart released by the Commerce Department which shows the changes in furniture sales on a retail level.

JLDI Index

The Jacobsen derived its leather demand index by using an oscillator that captured an index from 1-100. The index is created from year over year changes to each of 4 time series.

  • Car sales data using a multiplier which includes the percentage index of leather construction is weighted by approximately 14%.
  • Year over year leather furniture sales is weighed by approximately 18%.
  • Finally, Chinese exports of shoes and US sales of shoes that are leather are weighted by approximately 68%.

Current Economic Backdrop

Economic conditions in February continued to reflect a divergent global marketplace. While exports in China surged unexpectedly, retail sales and car sales in the United States slumped. The decline in US economic activity could have been a result of weather conditions, which will only be realized when data for April is released in May. Overall the decline in furniture sales, and cars sales trumped the positive increases seen in Chinese exports of shoes.

The JDLI readings are on the right axis accompanied by prices of Heavy Texas Steer on the left side. The current month JDLI index reflects a reading of 42.97 down 9.99 from last month’s 52.96.

 

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