Employees’ return to office and the ‘lipstick effect’ could be the reason for high inflation in beauty products and services, with prices increasing at 6.3% in April-June quarter and 6.5% in FY 2023. However, the average inflation saw a much stronger fall in April – June quarter at 4.6% versus 6.7% in FY 2023.

According to Yuvika Singhal, Economist, QuantEco Research, this could be due to the ‘lipstick effect’ of consumers. The lipstick effect is a phenomenon where consumers indulge in affordable expenses during a financial crunch. Another reason for the inflation in this segment could be the rising prices of beauty products and services. She stated robust demand from upper income group to be one more contributing factor.

Beauty products, toiletries, and jewellery are grouped together in the personal care segment. In June, this category saw a 9.03% inflation versus the overall retail inflation of 4.81%.

According to Madan Sabnavis, Chief Economist, Bank of Baroda, producers passing on expenses to consumers, and employees returning to office after the pandemic could also be two reasons for a hike in prices in this category. However, he added that the impact might not last long and should be watered down by 2023 end.

Similar inflation is seen in the ornament sector too, averaging at 9.8% in Q1 FY 2023 versus 6.7% in FY 2023.

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