DENTAL CONSENSUS (Negative Consensus/Bull Market Indicator) Does less fillings portend slower economic growth?

April 24, 2015

In booming economic times, one would think people would be more willing to address certain personal infrastructure items such as dental hygiene. Sikka Software took a look at some dental industry data and found the level of activities within the dental office can foreshadow upcoming economic activity. Right now it doesn't look like happy times in the dental chair

Return Visits

Follow-up dental visits fell in January 2007, roughly 11 months before the economy started to dip. They declined again in 2009, amid the recession. This past August, return visits dipped again. According to Vijay Sikka, "This is a forward indicator signifying a lack of consumer confidence."

No X-Rays Please. Just a Cleaning Thanks

During down years, patients tended to opt out of X-rays and more complicated maintenance, leading to unpredictable and lower-than-expected revenue for dentists.

Quantity of Treatments

When follow-up visits start falling, dentists will become concerned about future revenues. What subsequently occurs is that they will then recommend and schedule more treatments for limited time patients are in the office as they don't know when they will show up again.

Collecting Payment

Patients and insurers are slower to pay when the economy dips. Accounts receivable—outstanding bills—are approaching 2008 levels and are up 22 percent since last year.

So the dentists appear to be telling us that economic clouds are gathering on the horizon. Their patients aren't coming back as frequently. When they do it is for bare minimum treatments and more and more, they are taking their sweet time settling up accounts. Wage growth has been flat at best so consumers don't have the extra cash to pay for that crown or necessary root canal. Should this malaise manifest itself, interest rates would have to remain where they are which is conducive for stocks. So avoid that dental chair at your economic and health peril. Your portfolio may thank you.