Leading Lipstick Indicator

Haters gonna hate, and consumers gonna consume. But what those consumers consume can change leading up to an economic recession, and that’s what the Leading Lipstick indicator is all about.

As it turns out, when consumers begin to lose confidence in the economy, they stop buying expensive luxury items—like shoes and yachts—and instead buy less-expensive luxury items…like lipstick.

It’s true, and while we can’t put an exact number to the indicator (there’s no differential equation we can apply to lipstick sales and consumer confidence), evidence suggests that lipstick sales often increase quite a bit when financial times are tough. That’s because lipstick is considered a “cheap luxury.” It’s something we can spring for even when we’re tightening the belt.

Financial analysts often look to the sale of lipstick and other cheap luxury items, like manicures and boxer briefs, to gauge how consumers are generally feeling about the economy.