A 'treat yourself economy' is coming, data suggest

• The rise in personal care spending may be a sign that American consumers are feeling more confident.
• Better-than-expected retail sales last month indicate a coming “treat yourself” economy.
• Consumers may look for more lenient products as the economy begins to recover.

Long, flowing locks and perfectly pampered skin are signs that the economy is on the upswing — or at least, American consumers are behaving that way.

The uptick in retail sales and personal care spending in recent months suggests that people are increasingly treating themselves to some luxuries they may have been giving up amid recent recession fears and inflation problems.

Retail sales rose In August, according to federal data – there was a 1.4% increase compared to the same period last year. That was a better reading than economists expected.

These rising numbers point to a trend that Washington Post reporter Heather Long called “treating yourself frugally” in a conversation with Market Last week.

“This feels like the year of the little brag,” Long told the outlet. “This is a really healthy sign for the economy.”

Buyers often reward themselves for weathering tough economic times by upgrading their selections of personal goods and services, Peter C. Earle, chief economist at the American Institute for Economic Research, told Business Insider.

Long pointed to one example of such a “bounty” — the “Utah hair trend,” which has exploded on TikTok and other social media platforms in recent weeks after it was popularized by the stars of the Hulu reality series “The Secret Lives of Mormon Wives.” “.

Some women spend up to $2,000 on human hair extensions and styling services to get perfect waist-length waves, a hairstylist recently told the Wall Street Journal.

It's an expensive trend that may have been less achievable a year or two ago when personal care spending declined nationwide.

During recessions or economic downturns, consumer behavior in personal care shifts toward placing just the essentials, with people prioritizing essentials like soap and shampoo over more specialized items, Earle said.

The “lipstick effect” is an economic theory that posits that sales of affordable luxuries, such as lipstick, rise during recessions as people seek “an emotional lift without breaking the bank,” Earle said.

As the economy begins to recover, consumers are generally regaining confidence, increasing their discretionary spending patterns, and happily adding more than just lipstick to their shopping carts, Earle said.

In the second quarter of 2024, American consumers spent more than $200 billion on personal care products, up from $199 billion in the first quarter and $193 billion in the second quarter of 2023, according to September data from the Bureau of Economic Analysis, adjusted year-over-year. . Rates.

“There is a noticeable shift away from basic or low-priced necessities toward more indulgent products and services,” Earle said. “Consumers are more willing to spend on luxury or high-quality personal care products that they avoided during the recession, such as high-end hair care products or designer skin care products.”