Is Lipstick a Recession Indicator?

By Madeline Reilly

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Host We may be headed towards  a recession. How to tell? There’s the bond market, consumer sentiment, another anotherlittle/cheeky way. The he “lipstick” index 

Host Intro Clip: it's called the lipstick index, and it's the theory that as the economy goes down, sales of things like lipstick go up….It is called the lipstick indicator, and it has long given investors and consumer companies a pretty good sense of the economy. (Credit CBS Morning, Bloomberg News)  

Madeline Reilly explores some alternative theories for testing the health of the economy. 

REILLY 1: The lipstick index is supposed to be a way to measure consumer behavior.

 For example, small purchases can be correlated with an upturn or a downturn. 

Let's say, the economy isn't doing as well, people buy more lipstick to, indulge in an emotional luxury. Like buying yourself a bottle of wine after you've had a hard day. 

REILLY 2: Charles Lindsey is a Professor of Marketing and consumer behavior at the University at Buffalo He says the lipstick index can be unreliable. 

Lindsey 1:it’s a very imperfect indicator. Lipstick stick sales did go up after 911 at the same time, if you look at the great recession and the pandemic, they they went down in line, went so.

REILLY 3: The lipstick index was created by Leonard Lauder, son of Estee Lauder after 9/11. Possibly to sell more lipstick in a difficult market. Lindsey says it hasn’t held up, but there’s another fashion related way to measure the health of the economy. 

So there you have it, with

.On the other hand, I should say, if we transition to the headline, hemline little bit more reliable.

REILLY 4: The hemline index.

HEMLINE MONTAGE: Traders and Designers alike believe that when stocks are falling,g skirts get longer, and when stocks rally, it’s time to bust out the minis. The stocks rise the shorter their dresses get. (Credit to Bloomberg News) 

Lindsey: Hemlines went up during the roaring 20s went down during and after the Great Depression all the way through World War Two, REILLY 5and then through the 60s lines went up all the through to what they called the millionaire 80s And then went went down again when in the  recession in 87LINDSAYso a little bit better correlation there than with lipstick, but again, a very imperfect index. 

Reilly 2: Dawnn Karen agrees. She’s known as the “Dress Doctor” and says she prefers to measure the country's economic health by looking at fashion. She says she’s noticed some changes since the pandemic: 

Dawnn Karen:  I have been seeing the longer skirts. I have been seeing darker colors.

Reilly 2:  Karen says fashion choices are one way consumers express themselves during hard economic times. Like a trend known as coastal grandma. Imagine Diane Keaton in a romcom. Big sun hats and blue pinstriped shirts. Or, another known as “old money”. Which I’ll describe as Fake Channel. Meaning fast fashion, plastic pearls, and cheap cheap sunglasses. It’s a conservative look. 

Karen: So I feel like when you dress conservative, it's, it's having a bit of control, trying to conceal what you're going through, trying to present this image of I'm put together

REILLY: But Professor Lindsey says we can’t fully rely on these indicators. Instead, look to at how consumers are  spending on other luxuries like alcohol and dining out. If the economy is doing well - they tend to loosen their purse strings. Madeline Rielly, Columbia Radio News.