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Playing Consumer Catch Phrases

Woman shopping for clothes
Yuri Arcurs | Photographer's Choice RF | Getty Images
Woman shopping for clothes

We've put together a shopping list of catch phrases that apply to the consumer economy.

Then, we took the theories to the analysts who track consumers, retail and fashion and put them to find out if they hold any truth.

The experts:



Sucharita Mulpuru, Forrester Research Principal Analyst
Sucharita Mulpuru, Forrester Research Principal Analyst

Sucharita Mulpuru, Forrester Research Principal Analyst



Hitha Prabhakar, Style File Group Analyst
Hitha Prabhakar, Style File Group Analyst

Hitha Prabhakar, Style File Group Analyst, CNBC Contributor



Richard Hastings, Global Hunter Securities Macro & Consumer Strategist
Richard Hastings, Global Hunter Securities Macro & Consumer Strategist

Richard Hastings, Global Hunter Securities Macro & Consumer Strategist







lipstick_200.jpg
Studio 504 | Getty Images

1. Lipstick Indicator: Matte, Stain or Gloss. Lipstick sales go up during shaky economic times.

Mulpuru: Lipstick—no longer relevant.

Sales are always good—driven by teens hanging at malls who have nothing else to do. Thank the mall rat culture.

Prabhakar: I don't think this theory really holds up on a macro level.

If you look at Estee Lauder's income statement from Q3 of 2008 to Q4 of 2010, you'll notice that total revenues took at dive at around Q2 and Q3 of 2009 which was the low point of the recession. Revenues took another dive in Q1 and Q2 of 2010, when consumer confidence was at a low point.

The company did beat analysts expectations when they reported Q2 earnings for 2011, but when you look at the big picture women hold back on luxury purchases such as skin care and lipstick when times are tough for the most part.

Chief executive Fabrizio Freda credited the return of the luxury shopper for the increase and I have to agree with him but would add one point- it's also the return of consumer confidence.

I did over hear a woman on the subway talking about how she would rather not eat for the week than not have her favorite MAC lipstick on hand, so go figure.

Hastings: If lipstick sales go up during uncertain times, then I’d hate to see what girls look like when times are good.







miniskirt_200.jpg
AP

2. Skirt Length Theory: Bulls like shorter hemlines.

Mulpuru: It's different these days.

The depression may have been about long hemlines, but the great recession coincided with the advent of cultural icons like the Jersey Shore and the Kardashians who have, uh, minimalist approaches to fashion.

Prabhakar: This is purely coincidence of cyclical patterns.

For example, in the 1920's everyone thinks short skirts a la "flapper dresses" were in style the entire decade. It wasn't the case. In fact, they didn't come into style until 1926-1929 and even then the hemline was right below the knee.

During The Great Depression, yes, people were se

aspirinwing less and looking for cheaper means of clothing manufacturing, however no one talks about Madeline Vionnet who came up with the "cross cut bias" pattern which was all about the open back, floor length dresses. This design was the start of the longer hemline trend.

Cut to the 1960's when the micro mini was in style then the next decade skirts got longer. Well, what did you expect? Skirts couldn't get any shorter therefore designers had to add length!

And just to put a nail in this theory, in 2009, Designers like Philip Lim, Marc Jacobs, even Tommy Hilfiger have made their hemlines shorter- and not only are hemlines getting shorter, dresses are getting more ostentatious- shiny sequins etc., and the DOW was still at low levels well into 2010, not to mention hugely volatile.

Skirt length theory is a little silly.

Hastings: The problem with this theory is not the length of the skirt, it’s the long-term outlook for the growth horizon of legs.

If leg growth stalls, then we could actually lengthen skirts again in order to go long the leg. And sometimes leg growth deceleration could be correlated with a down leg in the market.










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Blue Line Pictures | Getty Images

4. Cardboard Box Theory: Cardboard box output forecasts non-durable goods purchases.

Mulpuru: Yes, it's still an indicator. But, not because of manufacturing. It's because everyone is buying everything from Amazon.com. (Nasdaq: AMZN.) They're all about cardboard boxes... and consumption.

Prabhakar: I think a better Index to be keeping an eye on is the Dow Transportation Index which out of its 20 components, 16 focus primarily on the movement of merchandise.

The DJT hit its lowest point March 6th, 2009 at 2194.99, when the country was well into the recession.

Cut to January 11th, 2011 when the United Parcel Service (NYSE: UPS) and FedEx (NYSE: FDX) raised Q4 estimates the DJT was at 4262.86 and continues to climb.

The Cardboard Index makes logical sense, but it's not for a sophisticated investor.

Hastings: Cardboard box production is a nice, inverted correlation to non-durables – unless it means that investors are packing it in.

5. Do You Have Your Own Pet Indicator?

Mulpuru and the Suburban Farm Animal Owner Theory: If you can afford a cow so you can make your own cheese because you're such a foodie, times are good for you. I met such a man yesterday.

Prabhakar and the Men's Underwear Index or MUI: It basically says that during a recession, men stop purchasing underwear.

When they feel better about the economy, there is pent up demand and dudes rushes out to purchase/replace brand new skivvies.

Based on what the men's department at Macy's, J.C. Penney as well as Saks Fifth Avenue they have all said to me, they have seen a steady increase in underwear purchases over the past year.

Hastings' and the Bark Cycle Theory: During major cyclical inflections in the economy, consumers say they are being cautious and worried but they actually increase spending. This is happening right now.

The economy is getting better but all consumer surveys are picking up negative vibes about driving, gas and future price trends.

Meanwhile, their confidence is actually improving because they aren’t getting fired, and they are spending decently right now and waiting until things get bad.

All barking (except for lower income consumers—they are barking and pulling back a bit).

Stephanie is Squawk Box producer. Follow her on twitter @StephLandsman

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