What is the Leading Lipstick Indicator?

Leading lipstick indicator, sometimes called the lipstick effect, is an economic indicator that suggests an increase in sales of small luxuries such as lipstick can indicate an oncoming recession or period of diminished consumer confidence.

Key Takeaways

  • The leading lipstick indicator refers to an economic indicator that suggests that consumers turn to less economic indulgences, such as lipstick, when they are not confident about the economic future.
  • Analysts have made the case against the lipstick indicator arguing that they increase even during times of prosperity.

Understanding the Leading Lipstick Indicator

The Leading Lipstick Indicator is an economic indicator that suggests that consumers turn to less expensive indulgences, such as lipstick, when they do not feel confident about the economic future.

This indicator, sometimes also called the Lipstick Index, was initially proposed by Leonard Lauder, chairman of Estée Lauder, in the wake of the September 11 terrorist attacks. Lauder, who has a vested interest in the sale of lipstick, proposed that in the months following the attacks, his company’s lipstick sales improved. However, reliable historical figures to corroborate this phenomenon, leaving the correlation between consumer confidence and lipstick sales in doubt.

The Case Against the Leading Lipstick Indicator

Analysts are increasingly arguing that the lipstick effect may have outlived its usefulness. In 2009, Kline and Company, a market research company, analyzed lipstick sales from 1989 onward and found that the figure increased even during times of prosperity. Euromonitor, another research firm, has forecast that lipstick sales will increase by 18% between now and 2022 even as global economic growth declines and there is talk of recession.

Analysts from Mintel found that sales for lipstick actually fell by 3% during the Great Recession while nail care products witnessed an increase in sales during that time. The firm suggests that lipstick sales should be replaced with sales for key categories, such as skin and body care, in the beauty industry. Alison Gaither, an analyst with Mintel, said there's loyalty to the industry as a whole but "certain categories have a safety bubble."

In a 2012 study, four researchers found that lipstick sales are more likely correlated to a perceived increase in sexual attraction created by this product rather than consumer confidence.