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RAPAPORT... Affluent households in the U.S. have turned overwhelmingly pessimistic about the economy and their spending plans for the upcoming Christmas season, according to the latest luxury tracking survey by Unity Marketing. Several key indicators of consumer confidence haven't been this low since the recession of 2008 and 2009. Affluents' expectations on future luxury spending this Christmas also took a dramatic downward turn with only 20 percent of those surveyed planning to spend more on luxury goods compared with 31 percent one year ago. Furthermore, 28 percent expect to spend less and that up from 18 percent last year, according to Unity Marketing. Pam Danziger, the president of Unity Marketing, explained that the government shutdown did no favors to economic sentiment, but affluents, who represent the economy's heavy lifters in terms of consumer spending, expressed long-term uncertainty in terms of governmental policy and its impact on business. ''That uncertainty is measured in a sharp drop in the Luxury Consumption Index (LCI). The latest survey results predict a weak turnout for the holiday shopping season this fourth quarter,'' Danziger said. Unity Marketing urged retailers to ''pull out all the stops'' in terms of promotions and discounting this season to attract these cautious shoppers. The most important feature affluents say they will look for when choosing a gift is to find it on sale or at a deep discount, Danziger said. She noted, however, that the second most important feature that makes a gift appealing is that it be ''Made in USA,'' which reflects affluents' growing desire to support U.S.-based companies. The average amount affluents expect to spend on Christmas-season gifts is $1,730, according to the firm. Other findings from the index revealed that affluents are increasingly pessimistic about their own financial status over the next 12 months; the majority of affluents believe the economy overall is headed in the wrong direction and far more affluents plan to cut back on gift spending this Christmas when compared with 2012 plans.
Tom Bodenberg, Unity Marketing's chief consumer economist, said, "The reaction is not entirely due to Washington per se. Rather, it is due to a ripple effect -- uncertainty about both unbridled Washington spending and the inability to generate funding to pay for such spending -- which has transformed equity markets. The resulting drop in consumer confidence (which was actually improving as recently as late summer) is affecting demand across all income segments. Bear in mind the resolution of the debt ceiling issue is only postponed -- our political system has been transformed into 'Groundhog Day.' Cloudy weather in D.C. portends a cloudy market for luxury goods and experiences." Along with depressed affluent consumer confidence, luxury and high-end gift spending recorded during the third quarter was down some 26 percent from the second quarter, and off nearly 40 percent from same period last year, according to Unity Marketing. The only bright spots in the current survey were home electronics, especially high-end television sets and home computer systems; major appliances, bath fixtures and building products, owing to affluents investment in home improvements; and beauty products such as lipsticks and other cosmetics for an immediate lift, while foregoing more expensive luxury indulgences.
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