As concerns rise over the impact of President Donald Trump’s global tariff war, the question on many minds is whether Canada is heading into a recession. But experts caution against relying on folklore-like indicators—such as lipstick and men’s underwear sales—to draw conclusions.
Economists point to solid fundamentals and data-driven measures like gross domestic product (GDP), employment trends, and consumer confidence as true indicators of economic health. The latest GDP data from Statistics Canada showed a 0.4 per cent growth in January, the strongest monthly gain in nearly a year. However, projections suggest stagnation for February, raising speculation about a potential slowdown.
A recession is typically defined as two consecutive quarters of declining GDP. Though some economists expect first-quarter growth to reach around two per cent, many remain wary of the months ahead. TD Economics’ Marco Ercolao describes the outlook beyond March as “turbulent,” citing the global trade war as a key factor.
The labour market offers another window into economic momentum. With unemployment on the rise and companies scaling back on hiring, pressure is mounting. While a recession is not the same as a depression—which is far more severe—it still presents major challenges for households and businesses.
Since hard data often lags behind actual economic shifts, people turn to unofficial indicators to read the economic tea leaves. These range from shifts in consumer behaviour to internet chatter. On platforms like TikTok, “recession indicators” have become a trending topic, sparking debates both online and off.
Some of the more unconventional theories include the so-called “Diaper Index,” which suggests that financial strain may lead parents to stretch diaper usage, resulting in more pediatric visits for diaper rash. Another theory, the “Lipstick Index,” gained traction in the early 2000s when Estée Lauder observed a spike in lipstick sales during downturns, interpreted as a low-cost pick-me-up in hard times.
Then there’s the “Men’s Underwear Index,” which posits that underwear is one of the first clothing items men stop buying during tough economic times and resume purchasing when conditions improve. Similarly, the “Hemline Index” theorizes that skirt lengths trend upward in good times and downward during slumps—a claim most economists dismiss.
While entertaining, these theories lack scientific support. Economist Moshe Lander points out that economic downturns often push people to pursue new career paths or return to school, as they feel they have less to lose during uncertain times.
Consumer habits also shift—grocery shoppers may gravitate toward discount retailers or generic brands. Writer Sarah Bartnicka notes that such behavioural changes can offer early signs of financial stress, but urges caution in drawing conclusions without hard evidence.
Ultimately, central banks and policymakers won’t be adjusting rates or strategies based on lipstick sales or diaper rash trends. However, consumer sentiment—however it’s formed—still plays a role in shaping the broader economic environment.
“There’s just so much uncertainty right now,” says Bartnicka. “And I think the way that people are feeling is a reaction to that. But it’s very important not to overreact until we see real data.”
As Canada waits for the next GDP update on April 30, one thing is clear: in times of economic ambiguity, it’s tempting to seek meaning in the small stuff—but the real picture lies in the numbers.