Confidence Among Luxury Consumers Falling

August 17, 2006

Confidence Among Luxury Consumers Falling

Concerns about war and terrorism as well as the country's economy has led to a 14-point drop during the second quarter in the Luxury Consumption Index, a measurement based on a quarterly survey of 1,000 luxury consumers by Unity Marketing in Stevens, Pa.

The index fell from 113.2 in Q1 2006 to 99.2 in Q2. "How they feel about their personal financial health dropped," says Pam Danziger, president of Unity Marketing. "How they feel about their prospects over the next 12 months dropped. Their expectations about future spending on luxury dropped. But most significantly, luxury consumers' feelings about the financial health of the country declined the most."

According to Danziger, at the close of the second quarter, 47% of luxury consumers believed the country was worse off compared to three months ago. Only 16 percent felt it had improved, Danziger says.

Consumer worries have been prompted by rising gasoline prices, a decline in the housing market, the beginning of the election season and the reduction in the rate of economic growth. Consumers are also concerned about the impact of unrest in the Middle East.

The luxury market reflected the dip in confidence, remaining flat rising only 0.7% from the first quarter to $221.8 billion. Experiential luxuries was the only category that rose, while others declined; personal luxury, including jewelry, watches, pens, fashion and more, fell 8.7%.

"The growth in the experiential luxury market is not surprising in the face of luxury consumers' growing feelings of anxiety," says Danzinger. "When they feel bad, they will spend money in the areas of their life where they gain the greatest personal satisfaction and happiness and that is toward experiences. For most luxury consumers the experience of a night out on the town or a romantic weekend getaway gives them far more personal pleasure than buying another designer handbag or a new high tech television set."

These findings are based upon Unity Marketing's quarterly luxury tracking study which surveyed 1,012 luxury consumers (average income $147,900 and age 43.4 years).

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