How Lipstick and Underwear Can Predict the Economy

Consumer spending drives more than two-thirds of GDP, offering important insight into the state of the economy. Obviously, there are more substantive predictors of a recession than lipstick and underwear — like unemployment, spending and wage data. That said, you might want to think twice before buying that lipstick. The theory was born during the 2001 recession, when Estée Lauder noticed that lipstick sales had still managed to climb. The same was true from 1929 to 1933, during the Great Depression. The phenomenon — known as the “lipstick index” — in which purchases of cosmetics are inversely correlated with the health of the economy — remains true today. Sales for lipstick spiked 48% in the first quarter of 2022. In 2008, as the nation spiraled into the Great Recession, Alan Greenspan, the head of the Federal Reserve at the time, pointed to one product as a good economic predictor: men’s underwear. His reasoning was that men tend to forgo buying new underwear during a recession because it's less obvious when it's time for a new pair. Underwear isn't something that's noticeable, like needing a new suit. When boxer and brief sales go down, the economy is soon to follow.