Economic indicators are often filled with complex data and financial reports, but sometimes the simplest indicators can reveal the biggest truths. It is in this context that two unusual methods are used to understand the signs of recessions and crises: lipstick and men’s underwear indices. These indices provide information on the general economic situation by monitoring changes in consumer behavior during recessions.
Lipstick Index
First, let’s look at the lipstick index. This index, which was introduced by Leonard Lauder, the former manager of Estee Lauder, during the 2001 economic crisis, observed the increase in lipstick sales during periods of economic recession. Lauder has dubbed this phenomenon the‘lipstick effect‘. Basically, when times are tough economically, people avoid more expensive luxury goods and opt for smaller luxuries that make them feel good and are relatively cheaper. This leads to increased sales of affordable cosmetics such as lipstick. Therefore, this increase in lipstick sales shows that consumers tend to pamper themselves with small gifts while avoiding larger purchases.
Men’s Underwear Index
The men’s underwear index, on the other hand, points to the opposite, with a decline in men’s underwear sales in times of economic recession. This index refers to a situation where men postpone underwear purchases and prefer to wear their existing underwear for longer. This indicator, popularized by former Federal Reserve Chairman Alan Greenspan, indicates that a decline in men’s underwear sales signals an economic recession. When men start to care less about the condition of their underwear, this is often taken as a sign of deteriorating economic conditions.
These two interesting economic indicators are unusual but provide valuable insights into consumer behavior and the overall economic situation. Such simple but effective indicators used in economic analysis can help us see the bigger picture and perhaps help us anticipate bigger economic problems.
Source: Business Review