May 2, 2008

Lipstick clue to economic state

There are many indicators which can be used to determine the state of the economy, one of the most accurate signs is high street shopping. This is because of the spending involved, but even though the spending is down in the amount spent, the actual high streets are still full of people shopping.

This goes to show that although the people are out shopping, the current economic climate means that they are not spending as much cash as they would do if the climate was better. This is where the lipstick theory comes into play.

It works like this, a woman goes into a store and sees a fantastic dress or pair shoes, but the price tag is £300, the woman thinks about the current state of financial affairs and decides not to buy the £300 item, but instead buys an expensive lip stick for £20. Although the lipstick is expensive for that item, it is not as costly as the £300 item.

It is said that lip stick sales increase when there is a financial crisis looming.

Source [NY Times]