Consumer Spending Confidence Mapped to Men’s Underwear and Women’s Lipsticks
Want to know if the economy is on a recovery spell?
Look no further than the sales of men’s underwear or a woman’s Lipstick collection. These indicators have been relied upon by many economists in predicting the direction of economic upswing or slump. Post an economic recession, one can look out for some unconventional economic indicators like these. Consumer behaviour derives these indicators’ work during such economic situations.
Understanding the Men’s Underwear Index (MUI)
The Men’s Underwear Index((MUI) was advocated and favoured by the former US Federal Reserve Chairman Alan Greenspan in the 1970s. This informal index analyses to measure how well the economy is doing based on men’s underwear sales. The theory behind this is simple: if underwear sales are rising, the economy must be improving, and vice-versa. The fundamental premise is that men tend to view underwear as a necessity instead of a luxury item, meaning that product sales will remain steady, except during severe economic downturns. Hence if men are not buying new underwear, the nation’s economy is in real trouble.
The event of a severe downturn changes the demand for these goods, decreasing purchases. Therefore, underwear’s overall purchasing trends makes up for a good indicator of discretionary spending for consumption at large, especially during turnaround periods.
Economists argue it is an even more reliable barometer of the economy’s state than the Lipstick Index.
Lipstick Index: Another Unconventional Economic Indicator
Leonard Lauder, the heir to the Estee Lauder, introduced the Lipstick Indicator during the economic downturn post the September 11 attacks. The lipstick indicator suggests that a surge in sales of luxury products like lipsticks can indicate an oncoming recession or period of diminished consumer confidence. The premise is that consumers turn to less expensive indulgences, such as lipstick, when they do not feel confident about the economic future.
Though the Lipstick Indicator is not an accurate measure of an oncoming recession, it marks a shift in consumer confidence. Many will forego more expensive luxury purchases in favour of a less expensive product, such as lipstick.
There are numerous tried and true indicators to analyze and report about the economy and predict the upcoming trends. However, both these indicators may not hold good in the current scenario, given that people prefer staying indoors while combating the coronavirus. With work from home and limitations on social gatherings, the general splurge on these items has drastically fallen. In the case of lipsticks, given that women need to wear masks while moving out, it is counterproductive to the theory. Still, as an existing theory it can prove useful to know what the financial trends are and how they can affect the economy.