Consumer confidence among the affluent rises, but spending falls

Luxury consumers’ confidence rose at the close of the third quarter, as measured by Unity Marketing’s Luxury Consumption Index which reached 103.3 points, up from 99.2 at the end of second quarter. But luxury consumers’ spending on luxury didn’t match their rise in confidence.

“The rebound of the luxury index to 103.3 points means that luxury consumers have more confidence about the economy and their financial status. In particular, there is a notable rise in luxury consumers’ perception of the financial health of the country. If the coming elections turn on the economy, this is good news for incumbents,” says Pam Danziger, president of Unity Marketing. “However, luxury consumers didn’t translate their growing consumer confidence into increased spending on luxury during the last quarter.”

The quarterly survey of more than 1,000 luxury consumers (average income $149,000) was conducted in October 2006.

Luxury consumers spent on average $13,432 buying luxuries in the quarter, which was 9.6 percent less than they spent in the second quarter. With a few exceptions—notably luxury electronics, furniture, clothing, fashion accessories, wine and spirits—the amount luxury consumers spent in most categories declined, with the spending levels of the super-affluent consumers (those with incomes of $150,000 and above) dropping the most. 

“The index shows some recovery in the third quarter, but not back up to previous high levels seen in the Spring ’06,” says Thomas Bodenberg, Unity Marketing’s economic forecaster. “While the lower and middle-class consumers have benefited from the drop in gas prices, this doesn’t have a significant effect in the luxury market. On the other hand, luxury consumers are much more impacted by the decline in the housing market. Super-affluents, in particular, who tend to live in the most expensive houses are likely to have experienced the steepest drop in their home’s value. This translated into more moderate levels of spending on luxury in the third quarter.” 

Danziger predicts that the holiday season will result in strong spending among the affluent.

“Given the greater levels of confidence, we feel luxury consumers’ spending levels will rise in the fourth quarter,she says. “Christmas 2006 gifting will be strong among luxury consumers.”