How do you judge whether an economy is sliding into a recession? Some unconventional theories suggest looking at the hemline of skirts or sales of ties could provide valuable insights due to patterns in consumer behaviour.
According to finance corporation JP Morgan, as of the end of May 2025, there was a 40% risk of a US and global recession this year. While these economists are likely to be relying on a wealth of economic indicators, from asset prices to the unemployment rate, read on to discover some surprising potential economic indicators.
1. Hemline index
The hemline index is a theory that fashionable skirt lengths rise and fall alongside stock prices.
For example, during prosperous periods in the 1920s and 1960s, skirts became shorter. In contrast, following the 1929 Wall Street crash, which led to the Great Depression, women tended to wear longer skirts.
There are several reasons why hemlines might be linked to the economy, including confident consumers being more likely to choose a shorter skirt.
Yet, it hasn’t always been accurate. The 1950s, despite being a period of economic expansion, are often associated with long, full skirts.
2. Lipstick effect
If you can’t afford to indulge in large luxury expenses or are worried about the state of the economy, you’re more likely to spend money on small luxuries, the lipstick effect hypothesis suggests.
According to this theory, during a downturn, rather than buying a designer dress, people would buy a small luxury item like a lipstick. The theory can be applied to other areas, such as choosing to treat yourself to an expensive drink or small gadget if you’re no longer feeling comfortable with more extravagant purchases.
As with the hemline index, there are times when the lipstick effect has been proven and unproven. However, what consumers choose to spend their money on could provide valuable insight into how they feel about their economic prospects.
3. Men’s underwear index
In contrast with the lipstick effect, the men’s underwear index suggests that men will cut back on spending on underwear when tightening their belts.
Indeed, according to a May 2022 report published in Business Review at Berkeley, sales of Men’s underwear in Australia fell during the 2008 recession and the Covid-19 pandemic. So, again, the personal items that people purchase could provide useful information about how they feel their finances will fare in the short term.
4. Skyscraper index
You might expect building skyscrapers to be associated with a strong economy. After all, they cost a lot to build and suggest that there’s demand for property. However, the skyscraper index could indicate that the opposite is true.
Indeed, the theory suggests that whenever a skyscraper breaks the record for the world’s tallest building, a recession will follow. This is true of the Empire State Building, which was opened in 1931 during the Great Depression, and the current tallest building, the Burj Khalifa in Dubai, broke the record in 2009 during a global recession.
When you look at the theory more closely, it’s perhaps not surprising. Skyscrapers are often conceived at the height of an economic boom, but as they can take years to complete, economies may take a turn during construction.
5. Necktie index
Ties could indicate confidence in the economy in two ways, according to the necktie index.
First, is that tie sales will increase during an economic downturn as employees want to ensure they appear professional and hard-working.
Second, the style of tie a person chooses could be influenced by their confidence. When the economy is strong, sales are likely to rise for wider and brighter ties, while slim ties and muted colours become more fashionable during a downturn.
So, next time you buy a tie, you might want to consider what your selection could say about your economic outlook.
You can be prepared for economic uncertainty
While there’s plenty of data economists can use to predict economic output, there are numerous factors that can affect it, including some that can’t be foreseen.
While it’s difficult to predict how an economy will fare, it is often possible to make this uncertainty part of your financial plan. By considering how economic ups and downs might affect your goals, you could take steps to keep them on track. Please get in touch to talk about your financial plan.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.