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.
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Finance: What are Lagging and Leading Ec...2 Views
Finance Allah shmoop what are lagging and leading economic indicators
Okay people Here's the economy kind of roller coaster ups
and downs and well but it generally goes up overtime
anyway More people more demand for toothpicks Ah bed sheets
hair growth formula You know that one really worked more
buyers of a one bedroom with a view of another
one bedroom with a view of Well yeah Wall Street
people and economists Yeah Those guys are always trying to
figure out where we are in these roller coaster cycle
ups and downs Are we here Are we here Are
we here Yeah very Carmen Sandiego So a leading indicator
is basically the canary in the mine shaft And if
you don't know the term Pita stopped this But it
used to be that miners would literally bring Canaris with
them into mine shafts Because canaries if they live to
tell the tale are extremely sensitive to gas Ah different
gas when there would be any kind of harmful leak
like from gas lanterns or from diesel engines or from
fissures in the earth while the canary would die quickly
or at least stop singing And then the miners would
skied addle out of there So the canary was the
leading indicator of a deadly gas leak and miners would
follow it awful Investors are always anxious to figure out
what leading indicators air saying about where the economy is
going Investors kind of live two quarters in the future
And if they believe we'll have a meaningful slowdown in
the economy while they'll usually begin selling well ahead of
them that is The economy or belief in economic growth
is a leading indicator often of where the broader stock
market is heading for the stock market generally anticipates the
economy well One famous canary no longer really in use
anymore are help wanted lines in the newspaper And yes
once upon a time those things were on paper way
before the founders of Glass Door indeed and the others
were even well invented are born so help wanted lines
were a leading indicator of the economy If they were
shrinking the economy was likely to be softening as demand
for incremental new hires was dissipating And I went the
other way too So today we look more often it
things like bond yields albeit with skepticism because the Fed
can raise and lower bond rates for a variety of
reasons defending the dollar internationally like they'd raise rates to
do that or with political back pressure well they might
lower them to give the stock market a chance TTO
walked upwards ahead of an election Lower rates mean lower
bond yields thus making things like equity Dividends are much
more attractive means of raising cash to you know pay
the rent Well new housing starts for another big leading
indicator volatile space But if the smart people of the
world are green lighting loans for builders to build new
homes well then a whole lot of people believe that
the demand will be there for those homes when they're
finished a year or two or three later Okay so
those air leading indicators what are lagging ones And why
would we even care about a lagging indicator like a
lagging indicator of your death Is well worms eating your
body And you really just not caring what lagging indicators
really service a truth telling mechanism to see if we
got our leading indicators right That is a lagging indicator
might tell us that we've just finished a big economic
boom and a really five quarters into a sort of
soft recession as we see declines in profits from gate
fees at Disneyland and Disneyworld And we might see unemployment
rates going up at an active clip And we might
see interest rates following with the governor hoping the stimulate
economic activity again Well all of these indicators however only
exist in a weird kind of vacuum because so many
cities and even states really have their own financial ecosystem
Economically speaking right Well the planet called Silicon Valley over
the last couple of decades has generally grown like a
bamboo chute on hot sweaty days with only blips of
economic cyclicality Other areas like Detroit and Central Baltimore can't
seem to grow no matter how much stimulus the feds
apply The key takeaway as with any economic indicator is
that real investor type Wall Street people really don't care
all that much about what theater economy is doing when
they put money to work for their clients And after
all while those economists were PhDs need at least something
to do with their time So you know why not 00:04:10.769 --> [endTime] opine on lagging and leading economic indicators Oh
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