What is the Lipstick Indicator and What Does It Have to Do With Economics?

Economic cycles can be predicted by many indicators, even lipstick. Some even say the Super Bowl is an indicator but football aside, there are some sound legitimate indicators.

Economists often look for indications of how the economy is trending. They are called Economic Indicators. But lipstick an economic indicator?

You might think that sales of lipstick, which is seen as a luxury item, would tank as the economy tanks. But you would be wrong. The sales of lipstick goes up when the economy tanks because women tend to use lipstick as a substitute purchase for other more expensive purchases that are being delayed like perhaps a silk blouse or expensive shoes. It is a little perk that still makes women feel good and boosts their mood.

Hemline Indicator

Another historic indicator is the Hemline Indicator. It seems that when the economy is bad hemlines drop and when the economy goes up hemlines go up. It appears that women generally reflect a more modest and conservative style of dress when the economy is bad. A call to fiscal conservatism might indicate a call to a more serious form of outward appearance.

I wonder if there would be an economy that would encourage boys to pull up their baggy pants and put on a belt?

Football Indicator

Then there is the NFL indicator that predicts the economic future according to whether an NFL team wins (economy up) or loses (economy down) the Super Bowl.

There are some obscure economic indicators that are actually legitimate.

The Cardboard Box Indicator

As cardboard boxes go so goes the economy. Just about everything you buy comes in cardboard from cereal to tennis shoes. If there is a demand for cardboard boxes it means that manufacturers are producing and consumers are buying.

The Baltic Dry Index

The Baltic Dry Index is the cost of shipping dry goods any where in the world. What are dry goods and why are they an indicator? Dry goods are things like agricultural products, iron, coal and the commodities that are the basic materials for the production of manufactured goods and the operation of manufacturing plants.

If shipping prices are up this means that there are a lot of commodities being ordered and indicates that manufacturing is going on.

If shipping prices are down and there are a lot of surplus ships sitting in shipyards then it is indicative of a down economy and no goods being shipped. If shipping prices start to climb it is a good sign.

Container Traffic

Ports count the number of containers coming in and going out. The data is kept on whether containers are full or empty. If cargo and container numbers are up it indicates a good economy or a rising economy. You have to also look at what goods are being shipped and whether the containers are full.

There are many indicators and world events and politics that impact world and state economic health.

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Colin Dovey
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Posted on Jul 14, 2010