Jewelry Could Take a Hit if Economy Sours for Wealthy Consumers

With U.S. stocks just recently enduring its worst weekly decline in more than four years and residential real-estate values in decline, are the wealthiest consumers curbing their spending for high-end goods?

According to a survey of the most wealthy Americans by the Luxury Institute, the answer, so far, is no. However, the New York City-based organization says the wealthy do have a threshold of financial pain and these consumers say that they would cut back on luxury expenditures if setbacks become severe enough.

Which high-end industries would bear the brunt of any retrenchment in spending by the wealthy? Luxury hotels and resorts appear to be most vulnerable, according to the survey. Nearly half of those surveyed say they would reduce spending on luxury hotels and resorts. Forty-two percent say they would spend less on luxury automobiles and 39 percent identify luxury jewelry as a place to cut back.

Forty percent of consumers, with a minimum annual household income of $150,000, say that a decrease in the value of their assets would cause them to consider purchasing fewer luxury goods and services, according to the survey. Thirty percent of consumers with incomes over $500,000 and 33 percent with a net worth in excess of $5 million say they would consider spending less. Wealthy women are more sensitive to financial setbacks: 47 percent say they would trim spending in the face of reduced wealth, versus 37 percent of men.

Not all segments of high-end travel appear to be especially at risk, according to the survey. Destination clubs, private jet services, yachts, and yacht charters are among the areas where wealthy consumers would least be likely to cut back. Other areas that seem to be resilient are those where expenditures are at a low absolute level. About 10 percent say they would trim spending on luxury consumer publications, business and finance publications, or bathroom fixtures.

On average, wealthy consumers say it would take a 19 percent drop in the value of their stocks before they would consider cutting back on spending. Just 15 percent said a correction of less than 10 percent would prompt a reduction. Similarly, real-estate values need to decline 17 percent on average to cause a pullback in spending, with only one-in-eight saying that a drop of less than 10 percent would make them spend less.