Luxury consumers’ confidence plummeted during the third quarter 2005, according to Unity Marketing’s Luxury Consumption Index. The index fell to 94.4 points, its sharpest drop since the index began in 2004. The index measures luxury consumer feelings about their personal financial status and the prospects for the country as a whole.
The drop in luxury consumer confidence at the end of the third quarter came on the heels of the greatest increase in the index at the end of the second quarter when it topped out at 104.7, said Pam Danziger, president of Unity Marketing.
“While luxury consumers were in a funk in terms of the attitudes the index measures, they actually spent more money buying luxuries during the third quarter,” Danziger said.
Luxury consumers spent an average of $14,534 on luxuries in the third quarter, up 24 percent over average spending of $11,714 during the second quarter.
In a survey of 1,171 luxury consumers (average income $142,400 and age 42.9 years), the average amount luxury consumers spent on personal luxuries, such as apparel, fashion accessories, jewelry and watches, wine and spirits, was up 18.9 percent.Home luxuries, such as electronics, linens, appliances, art, antiques, furniture and tabletop, rose 12.5 percent. By comparison, luxury consumers’ spending on experiential luxuries, such as travel, dining, entertainment, and home services, declined in the third quarter by 19.5 percent.
“Over the seven quarters of luxury tracking, we have seen an inverse relationship between spending on home and experiential luxuries,” Danziger said, “Consistently when home spending goes up, experiential spending goes down, and vice versa. This quarter is no exception with luxury consumers investing significantly more buying luxuries for their home, in particular art and antiques, garden/outdoor, upscale kitchen appliances and luxury linens, and bedding. The ferocious weather much of the country faced last quarter likely contributed to a decline in travel.”
Thomas Bodenberg, economic forecaster for Unity Marketing and former Conference Board executive, said recent hurricanes was factor in the decline of the index.
“The bad news from the Gulf coast hurricanes, rising gas prices and continuing strife in Iraq took their toll this quarter in luxury consumer confidence,” Bodenberg said. “But on a positive note, over half of the panel members indicated the next twelve months will be better than current conditions.”
Unity Marketing publishes its Luxury Tracking Study quarterly with the next due in January 2006.
For more information, visit http://www.unitymarketingonline.com/reports2/luxury/luxury3.html or call Danziger at 717-336-1600.