Following our recent article suggesting that McDonald’s may, at times, serve as a more immediate economic indicator than the Federal Reserve, we now turn to a different lens: fashion. In this latest piece, written by another of our talented interns, fashion is explored not only as a potential indicator of economic shifts but also as a cultural marker of historic moments. Margarita Anishchenko is soon entering her final year at Heritage Private School, aiming to earn a place to study economics at a top UK university. With her article she is already stepping outside the box and is trying to link fashion trends with how economies are doing. A credible effort from a prospective economist, supported as always by our team.
Introduction
If you’re chronically online like most youths nowadays, you will have noticed the emergence of several micro-trends on platforms like TikTok, Pinterest, and Instagram for so-called ‘mob wife’, ‘old money’, and ‘tradwife’ aesthetics – fashion movements towards classically conservative styles. And if you follow financial news, you might also have seen sources like Forbes anticipating a potential recession by looking at traditional indicators like global Gold & Oil prices and consumer confidence surveys. Coincidence? I think not: these things are more connected than you may think. Sounds crazy, but the explanation is surprisingly simple.
High Hems, High Hopes
This idea of fashion and economic trends being interconnected has been around for a while: first proposed in the 1920s by the American economist George Taylor, the Hemline Index is an economic indicator proposing that female skirt lengths (hemlines) become shorter during business cycle booms and longer during downturns, though with a time-lag of about three years and a general tendency for skirts becoming shorter throughout the ages. In this way, the popularity of miniskirts during the early 2000s ‘Y2K’ fashion movement can be explained by the major economic expansion in the United States from 1993 to 2001. The logic? periods of economic prosperity mean that women feel confident about the future and fearlessly explore stylistic self-expression and experiment with bolder fashion choices, while times of hardship encourage them to fall back on reliable conservative maxi (long) skirts.
This idea extends beyond the Western World. For example, the traditional Chinese robes, Qipao, saw substantial alteration in the mid-20th century. The start of the Sino-Japanese war in 1937 (and of WWII), not only led to decreased confidence, but made the elaborately flamboyant qipaos simply unaffordable. In the manufacturing sector, fabric prices sky-rocketed from the war effort, so the qipaos saw revisions in style: the sweeping hemlines crept up, sleeves were removed, the silhouettes became tighter, and the collars lower – all for the sake of economy and keeping production costs (and price!) down. Economic restrictions thus subtracted the Chinese qipaos from their former glory.
Summing it all up: it appears that there are multiple causes for clothing to change. In the West, for example, the changes to hemline were due to behavioural factors (part of a social movement), whereas in the East, the changes to hemlines were caused by practical circumstances like the supply of raw materials. In this way, the clothing industry acts as an indicator of recent economic conditions, and, more specifically, reflects business and consumer confidence at the time. When you think about it, fashion is a form of creative self-expression and is influenced by the socio-economic outlook of its time, so using clothing styles to analyse the historic performance of the economy makes sense.
War Weaves What We Wear
Another way the economy affects fashion: international political developments have a significant impact on fashion crazes. Since international relations directly influence trade agreements, they also affect the supply of clothing and beauty products to the population of a country.
A recent example is the Russo-Ukrainian war. Following the economic sanctions placed on Russia by the European Union, United States, and United Kingdom, major clothing and beauty brands exited the Russian market as part of a political demonstration. These included Inditex (which owns the brands Zara, Massimo Duti, Bershka, Oysho, Pull & Bear, and Stradivarius), Asos, Reebok, Calvin Klein, and H&M.
Furthermore, luxury brands like Hermes, Prada, Chanel, Louis Vuitton, Gucci, and Burberry have also suspended operations in Russia. As a result, the fashion market in Russia was filled with numerous gaps, which domestic designers and companies were happy to fill. There was also an observed trend towards ‘Made in Russia’ collections and increased brand patriotism, both as a display of nationalist pride and because of the simple absence of familiar Western brands.
But the effects of the humanitarian conflict weren’t limited to the borders of Russia. Not only are Western brands losing out on exports to Russia (for example UK brand Asos indicated that Russia and Ukraine accounted for around 4% of sales), but the economic sanctions on the import of crude oil from Russia are expected to have severe logistical and production impacts in the short and long run. Not only will the cost of shipping rise from higher global cost of fuel, but the decreased supply of crude oil (a serious hit to the primary sector) may significantly affect clothes’ manufacturing processes by making the production of synthetic plastic-based fabrics like polyester and nylon more expensive, leading to a general increase in price for all clothing, and especially ‘fast-fashion’.
Staying on the topic of fast fashion, the 2025 ongoing US-China trade war has significantly impacted the fashion industry and consumer habits in the US. Fast fashion – a business model that produces ultra cheap, low-quality clothing at lighting-speed – is unfathomably popular, with giants like Shein and Temu (two low-cost retailers who ship from China) seeing immense success in the US in the past decade. Such companies gained traction because of a tariff loophole called the ‘de minimis exemption’, which allowed their low-value packages duty & customs-free entry into the US. Just this Spring 2025, President Trump cancelled the exemption, causing the price of these tiny imports to skyrocket. Consumers are now charged ‘hidden’ fees, so imported fast fashion has ceased to be cheap and accessible.
Essentially, the political tensions have resulted in a trade war that has raised the price of imports (and specifically of clothing imports), which constitutes a change in the trend for fast fashion in the US. Fashionistas now predict a further response of the market towards so-called ‘slow fashion’ – a movement pushing for sustainable, durable, and ethical products centred around resell retailers and local artisanal clothes-manufacturers.
Little Luxuries, Large Lessons
However, economic influences aren’t just limited to the clothing industry – we can observe the effects of the business cycle on the beauty industry, too. In 2008, Leonard Lauder, heir to the cosmetics empire Estee Lauder, publicised his hypothesis that when facing an economic crisis consumers are more likely to buy less costly luxury goods. Lauder backed this with evidence that his company’s lipstick sales rose simultaneously with the major decline in economic activity following the 2001 terrorist attacks. Consequently, this phenomenon became known as the Lipstick Effect. A similar occurrence came about during the 2020 global health crisis, when the face-mask mandates during the COVID-19 pandemic triggered an increase in the sales of eye-makeup, transforming mascara into the micro-luxury of choice.
Such examples can be logically explained: during periods of business cycle downturns, consumers have less disposable income, and demand for luxuries tends to fall, so women aren’t able to afford high-end purses, fur coats, or holidays abroad, but still have an appetite for these things. As a result, more women treat themselves to ‘little luxuries’ – small indulgences like makeup (lipsticks, mascara, nail polish, etc), since they crave the satisfaction associated with consumption while saving money during the period of economic uncertainty. So, changes in economic conditions and changes in fashion consumers’ behaviour go hand-in-hand in real time.
Flamboyant Fits for Financial Forecasts
As we have seen time and time again, economic conditions have historically been followed by changes in fashion and tastes. But what about vice versa? Can fashion be used as an indicator of future economic conditions? To an extent, yes!
Designers sense the vibe before central banks release statistics. Sometimes, before official sources like federal reserve banks publish their monthly or quarterly data, drapers, designers, and other trend-setters will shift their behaviour because of pressures like business and consumer confidence. A general sentiment expecting economic growth and stability encourages stylists to take risks with avant-garde fashion statements, while lower spirits in anticipation of recession motivate them to retreat to timeless (but boring!) classics. For example, longer hemlines, muted colours, and layered styling are all generally recession indicators – bleak colours on runways signal a bleak economic future. In this way, micro trends can precede macro movements!
Conclusion
All this goes to say that fashion and economics, beyond borders, across sectors, and throughout industries, are holistically linked. Fashion is not frivolous – it’s an industry that responds to and shapes consumer behaviour in a two-way reciprocal relationship.
Changing economic conditions can precede, be preceded by, or occur simultaneously with shifts in the fashion industry. In this way, fashionomics travels through every tense – past, present, and future. The next time the economy dips, pay attention to what people are putting in their closets and makeup bags. Turns out, the economy is always dressed for the occasion!
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