Predicting the Economy with Lipstick, Hemlines and Big Macs: Can Unconventional Economic Indicators Really Tell Us Anything?
Economists love data. Endless rows of numbers, charts that spike and dip, the kind of granular detail that can make or break government budgets and business decisions. But sometimes, rather than pouring over spreadsheets, commentators turn to more unconventional measures of the economy — indices born not in boardrooms, but in beauty aisles, fashion runways, and fast-food menus.
These pop culture indices — the Lipstick Index, the Hemline Index, and even the Big Mac Index — are quirky, memorable, and often cited in headlines. But how much weight should we really give them?
The Lipstick Index: Recession-Proof Glamour
Coined by Estée Lauder’s Leonard Lauder in the early 2000s, the Lipstick Index suggests that in times of economic downturn, women splurge on small luxuries like lipstick instead of big-ticket items. The idea is simple: when budgets tighten, a $40 lipstick feels like an affordable indulgence.
And indeed, cosmetic sales have occasionally risen during downturns. But like any rule of thumb, it doesn’t always hold. For example, during the COVID-19 pandemic - when lipstick sales fell dramatically thanks to masks - consumers turned instead to skincare and eye makeup. The principle still applied (small luxuries endure), but the product shifted.
Lesson: Spending habits adapt in creative ways, but people rarely abandon their desire for a little joy — even in tough times.
The Hemline Index: Skirts as a Signal
This theory dates back to the 1920s and suggests that women’s hemlines rise in boom times and fall in recessions. The Roaring Twenties saw flapper dresses with higher hemlines, while the Depression brought longer skirts.
It’s a neat visual metaphor, but fashion today is far too fragmented to make a clear connection. Streetwear, fast fashion, luxury couture — they all operate on their own cycles. Globalisation and online shopping have scrambled the once-uniform march of fashion trends.
Lesson: As a cultural signal, fashion is fascinating. But as an economic predictor, hemlines are probably better suited to glossy magazines than financial forecasts.
The Big Mac Index: Burgers and Buying Power
First published by The Economist in 1986, the Big Mac Index has more credibility than its lipstick and hemline cousins. It was designed as a light-hearted way to explain purchasing power parity - the theory that exchange rates should equalise the cost of a basket of goods between countries.
Because a Big Mac is relatively standardised globally, comparing its price across countries offers insight into whether a currency is under- or over-valued. While it’s not a perfect measure (local costs and taxes vary), it’s widely recognised as a handy shorthand for currency misalignments.
Lesson: Even a fast-food burger can teach us something serious about global economics - with a dash of humour.
Why We Love These Indices
Part of the appeal is accessibility. Economics can feel distant, abstract, and heavy. But tell someone that lipstick sales or skirt lengths might say something about GDP, and suddenly it’s relatable. These indices turn macroeconomics into a story people can see, touch, and even wear.
But they’re best treated as metaphors rather than reliable tools. A single data point rarely tells the whole story. The truth lies in patterns, context, and the bigger picture.
The Real Takeaway
Pop culture indices remind us that economics isn’t just about numbers - it’s about people. Behind every chart is human behaviour: how we adapt, what we value, and how we find comfort or joy when the world feels uncertain.
But when it comes to running a business, these playful signals won’t pay the bills. For directors and business owners, relying on cultural anecdotes instead of financial fundamentals can create blind spots - and blind spots are often where solvency issues first take root.
At The Ruhe Group, we know the warning signs don’t come from lipstick counters or burger menus. They come from balance sheets, cash flow forecasts, and creditor pressures. By the time those pressures become impossible to ignore, options are usually fewer. That’s why seeking advice early - based on facts, not folklore - is the best predictor of business survival.
