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Recession triggers ‘lipstick effect’

Some say hemlines and heels rise and fall with the state of the stock market. But for those who really want to know how bad things are there is only one item that counts: lipstick.

When times are tough, consumers stop spending on big ticket items. Car sales are down by a third; the drop in demand for mortgages has taken its toll of spending on carpets and furniture. But, according to one economist, rather than lose the spending habit consumers simply trade down to cheaper items to cheer themselves up. What’s more, this effect has held good in recessions of the past and in countries with different cultural traditions. Dhaval Joshi, analyst with RAB Capital, said that the recent sales figures from the world’s big cosmetic companies — L’Oreal, Beiersdorf and Shiseido — confirm that the so-called lipstick effect has returned as the global economy has headed into its first synchronised downturn since the early 1980s, with consumers increasing their spending on cosmetics even while economising on everything else. — © Guardian Newspapers Limited, 2008

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