Indicators

The Unity Marketing Luxury Consumption Index dropped 9.1 points at the close of the first quarter of 2008, according to the Stevens, Pa.–based market research firm.

“The LCI started to measure flagging consumer confidence among the affluent about a year ago at the end of March, but their spending on luxury didn't begin to retreat until a little later in the year,” says Pamela Danziger, president of Unity Marketing and the author of Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience. Danziger expects spending among luxury consumers to remain conservative for the next few months, at least until after the fall presidential election, when new leadership may provide an emotional lift.

The first-quarter drop comes on the heels of a 23.8 point drop at the end of the fourth quarter of 2007. But Thomas Bodenberg, Unity Marketing's economic forecaster, sees the figures as an indicator that the market has already hit bottom.

“The rate of decline of luxury consumer confidence from fourth-quarter 2007 to first-quarter 2008 was substantially less than from third-quarter to fourth-quarter 2007,” he explained, citing strong spending in home goods for the first quarter of 2008. With fewer affluent consumers able to sell their homes, they're investing more in them, he says.

Indeed, while 41 percent of luxury consumers indicated they planned to spend less on luxury in the next 12 months, 13 percent indicated theywere planning to spend more. Spending among the remaining 46 percent could theoretically remain unchanged.

Danziger says this is the time for retailers to make sure their offerings are compelling enough to entice shoppers right away. “As much as luxury marketers hate the word discount, these tough times may require it. Affluent consumers, as much as anybody else, love to find a bargain.”

4.4% Energy saw a major upswing to a seasonally adjusted 4.4 percent in May.

The Consumer Price Index for all urban consumers saw a seasonally adjusted 0.6 percent increase in May. While petroleum-based energy took a surprise hit in April, it compensated for the loss with a seasonally adjusted 5.8 percent increase in May. Energy also saw a major upswing, from no change in April to a seasonally adjusted 4.4 percent in May. Energy services increased 2.3 percent (seasonally adjusted)—maybe in preparation for the summer? Seasonally adjusted non-energy prices remained much more stable, however. The index for all items but food and energy rose 0.2 percent. While the index for apparel decreased for the third time in the past four months, the indexes for lodging away from home, public transportation and household furnishings made up for the decline.

57.2 Consumer Confidence Index in May, down from 62.3 in April

Source: The Conference Board