Do consumers buy little luxuries in a slump?

For the last few years, a widespread bromide has risen to the dubious level of common knowledge in marketing circles: In a downturned economy, people buy more lipstick. Leonard Lauder, the chairman of Estée Lauder, coined the idea (if not the term Lipstick Index) after Sept. 11, when the company noticed a dramatic uptick in sales and added shifts at some production plants.

Almost every industry has some product or service it considers "recession proof," which consumers supposedly continue to buy as a sort of emotional palliative, even when they're supposed to be hunkering down with the piggy bank, the hot plate, and the ramen.

Call them guilty pleasures. Clearly Americans consider some modicum of splurging essential, and this recession is a good time to see that theory in action. Here's a quick snapshot of American indulgence in the midst of the current economic crisis: McDonald's is reporting that sales have been on an upward trend for the last three months; Grand Theft Auto IV sold 3 million copies in its first day of release in May—probably the modern-day equivalent of ducking into the movies to escape the mean streets—and eBay reported that the single biggest-selling item on Black Friday was the Nintendo Wii Fit.

Ironically, nondiscretionary spending is tightening. People are buying groceries at Wal-Mart and Target and cutting their prescribed pills in half. Just so, many are still managing to make that one off-budget purchase that's apparently intended to soothe jangled nerves (nonpharmaceutically, one hopes) to provide a few moments of distraction, bliss.

So the idea behind the Lipstick Index is that besieged Americans still need little splurges and perks, maybe more than usual, and that little somethings are better than big nothings. But in the current economic decline it's not entirely clear whether people—OK, women—are buying lipstick specifically. Is Lauder's lipstick effect in play or not?

Since most cosmetics companies are subsidiaries of massive international companies like L'Oreal and Proctor & Gamble, it's hard to know for sure if lipstick is selling like it should be, and no one wants to brag to a reporter that there's one corner of the current crap sandwich that doesn't taste half-bad. But if lipstick is seriously hot right now, you'd think discount retailers like Target, Wal-Mart, and Kohl's would know about it. On their most recent investor calls reporting October sales, all three companies had mixed news.

They made it clear that consumers are pinching every penny, possibly even overreacting and stepping rather too hard on the brakes. Target and Wal-Mart both reported that sales of nondiscretionary, nondurable goods—that's food and health care supplies to us civilians—were in October as the economy self-destructed. In November, Target's numbers were down in every category with one notable exception: jewelry/accessories, which includes cosmetics. Wal-Mart noted a significant bump in its pharmacy and over-the-counter receipts, which includes—yes—cosmetics. But neither Wal-Mart nor Target got more granular about reporting whether their customers are bullish on lipstick or some other over-the-counter lifestyle accessory like, say, cashmere condoms. (Kohl's was bleak in all reported categories, thank you.)

That did not prevent the New York Times "Style" section from reporting in November that lipstick sales "in the last few months are up 40 percent," although the stat is unsourced and suspiciously general. Meanwhile, the Wall Street Journal says no with considerably more statistical authority. Journal blogger Cheryl Lu-Lien Tan cites industry statistics that say lipstick sales were actually down at least 6 percent in September compared with last year. But, take heart, sartorial economists everywhere: Hosiery sales were actually up 2.3 percent in the last year!

So what does it all mean? Are people comforting themselves at the cosmetics counter of Macy's like they did after 9/11? Here's a man's view of this crucial economic indicator: Have you shopped for lipstick lately? A quick consultation with a bemused spouse sent this correspondent over to the "massclusive" Sephora.com to find a range of representative lipsticks—133 from companies like Bare Escentuals and Bourjois Docteur. Sephora's "Best of Sephora" 2008 winner? Something called NARS lipstick. Comes in a black tube. Looks reddish, not too garish. Appropriate for these muted times. Cost: $24. Twenty-four bucks! That's like six double lattes, young scrimp-and-splurger!

Sephora's highest-priced lipstick offering appears to be an Yves St. Laurent "Duo Lip Colour Pallette." Sixty five bucks will buy you not only the European spelling, but this double shot of "lip colourant" comes in a locket on a necklace or bracelet. For those who want to do their part to prop up the Lipstick Index as a true reflection of discounted emotional relief during financial malaise, Sephora offers its own private-label "Girls Pearly Lipstick" for $2 and many other regular adult tubes in the range of $3 to $7. But almost all of these appear to be deeply discounted from original prices of $12 to $22. I'm no expert on return-on-investment or cost-value formulations, certainly not on behalf of the fairer sex, but I'm guessing that lipstick just isn't as enticing as it was in the economic downturn after 9/11.