Can lipstick be an economic indicator?
WHAT IS AN ECONOMIC INDICATOR?
An economic indicator is a metric used to assess, measure, and evaluate the overall state of health of the macroeconomy. They demonstrate how the economy is performing and can indicate if we’re getting into an economic slump or getting out of one.
There are several different types of economic indicators: GDP (Gross Domestic Product), Employment numbers, Stock Market performance, Retail Sales figures, Industrial production, Homes sales, Construction spending are some of the traditional indicators.
3 INTERESTING / NON-TRADITIONAL ECONOMIC INDICATORS
When researching this topic, I came across a few lesser known economic indicators these are interesting because they can show confidence at a more personal level.
LIPSTICK INDEX
In 2001, Leonard Lauder, the chairman of Estee Lauder cosmetics, famously started the lipstick index where he saw that when money is a bit tight consumers gravitated to small luxuries instead of big ticket items. He speculated that consumers substitute lipstick for more expensive purchases like dresses, shoes and/or handbags in time of economic distress.
MEN’S UNDERWEAR SALES
This theory, which was coined by Alan Greenspan (former US Federal Reserve chairman), is that since men’s underwear is considered an essential item, and not a luxury, sales should be stable. However, during times of economic downturn there is a considerable decrease in these sales and some believe that this can be an indicator of a economic downturn.
WAFFLE HOUSE INDEX
The Waffle House has a reputation for being well prepared for disasters and has often remained pen during extreme weather events or reopening shorty afterward.
This term was coined by FEMA Administrator, Craig Fugate after the Joplin tornado in May 2011. The storm devastated the town but the Waffle House remained open to protect and serve their communities. In fact, Waffle House has a limited menu prepared for times of food shortages and power outages. It also assembles “Waffle House jump teams” who can quickly reopen the restaurant, as soon as it is safe to do so, after a disaster. Other franchises, such as Lowe’s, Walmart, and Home Depot, have similar policies.
THE BOTTOM LINE
There are a variety of economic indicators that are used to determine and understand the current and future economic activity of our economy. The 3 non-traditional ones listed above may not be as accurate and the traditional ones, but can be used to showcase consumer confidence and preparedness.