Increases in retail sales and personal care spending in recent months suggest that people are increasingly treating themselves to luxuries they have refrained from amid recent recession concerns and inflation concerns. are.
Retail sales rose in August, increasing 1.4% from a year earlier, according to federal data. It was a better read than economists expected.
These rising numbers are indicative of a trend that Washington Post reporter Heather Long called the “self-reward economy” in a conversation with Marketplace last week.
“This feels like a bit of a splurge year,” Long told the magazine. “This is a very healthy sign for the economy.”
Peter C. Earle, a senior economist at the National Bureau of Economic Research, told Business Insider that buyers often upgrade their personal product and service offerings to reward themselves for persevering through tough economic times. Ta.
As an example of such a “reward,” Long said, she has been popularized on TikTok and other social media platforms in recent weeks after being popularized by the stars of Hulu’s hit reality series “The Secret Lives of Mormon Wives.” He cited the “Utah hair trend,” which has spread explosively. . ”
Some women spend up to $2,000 on human hair extensions and styling services to achieve perfect waist-length waves, one hairstylist recently told the Wall Street Journal.
This is an expensive trend that might not have been possible a year or two ago, when spending on personal care was declining nationwide.
According to Earle, during recessions and economic downturns, consumer behavior in personal care shifts to a focus on essentials, prioritizing necessities such as soap and shampoo over more specialty items. That’s what it means.
The “lipstick effect” is an economic theory that posits that sales of affordable luxury items like lipstick increase during recessions, when people seek “emotional highs without spending a fortune,” Earle said. said.
As the economy begins to recover, Earl said, consumers generally regain confidence, increase their discretionary spending patterns and are willing to add more than just lipstick to their shopping carts.
U.S. consumers will spend more than $200 billion on personal care products in the second quarter of 2024, up from $199 billion in the first quarter of 2023 and $193 billion in the second quarter, according to September data from the U.S. Bureau of Economic Analysis. increased from $. Fee.
“We’re seeing a noticeable shift from basic or low-cost necessities to more luxury products and services,” Earl said. “Consumers have become more willing to spend money on luxury and high-quality personal care products that they avoided during the recession, such as high-end hair care products and designer skin care products.”
