The rise in consumer spending is always perceived as a signpost for positive economic growth among analysts, there are, however, exceptions to this rule. Apart from the traditional economic indicators such as the unemployment rate and trade balance, there are sayings that lipstick sales can also serve as an indicator to measure the economic health of the country.

The Leading Lipstick Indicator, also known as the Lipstick Index, was coined by the Leonard Lauder, chairman of Estée Lauder, in 2011 when he witnessed the company’s lipstick sales doubled after the September 11 attacks. The idea behind the Index is that people are inclined to save up amid uncertainties and more prone to small luxuries.

History tells us that the uptick in lipstick spending often happens during economic recessions. The U.S. experienced an 11% surge in lipstick sales during the fall of 2001, while the spending on cosmetic products was up 25% back in the Great Depression. A jump in the Index mirrors a drop in consumer confidence because of the shift to relatively inexpensive luxuries.

Though the Index does not have the backing of official analysis and research to support its recession measurement, the shift in consumer behaviors heralds a diminishing consumer confidence when women forgo the pursuit of lavish handbags and jewelries and turn to affordable indulgences like lipsticks.

Despite not seeing similar lipstick sales trend in 2008, another cosmetic product is emerging as an indicator measuring economic strength. According to an interview conducted by the TIME magazine, nail-enhancing products are outpacing lipsticks that send women into a frenzy, said Lauder. The release of new lipstick shades does not excite women as much as it did decades ago. Instead of splurging on what they already own in their closets, people began to hunt for trending products in the beauty market. During the economic downturn from 2008 to 2011, the sales of nail-related goods increased exponentially by 65%, once again buttressing the analysis that people tend to avoid big purchases and pamper themselves with small luxurious products in times of economic hardship.

As time goes by, the lipstick effect has evolved as a term to describe the rise of smaller-ticket purchases amid economic downturns. As people are pulling back on opulent enjoyment, the odds of a falling economy grow.

So everyone, be wary the next time when you are about to purchase a lipstick. It might signal a slowdown in the economy!

Sources:

What Lipstick Tells Us About the Economy

https://www.economist.com/unknown/2009/01/23/lip-service