Luxury Sales Brings More Good News
Subject Luxury Sales
Topic Productivity and Growth
Key Words Consumer Confidence, Luxury Goods, and Seasonal Variation in Business Activity
News Story

Luxury goods sales are expected to make a comeback this holiday season, giving one more indication that the recession is finally over. High-end retailers such as Berfdorf Goodman, Ultimo, Tiffany and Company, Neiman Marcus Group, Saks Fifth Avenue, and other upscale merchants are stocking the shelves with $1,200 Givenchy boots, $1,800 animal print dresses, and $4,500 mink sweaters. The holiday catalog distributed by Saks Fifth Avenue features a $90,000 sable coat; a $15,800 Piero Milano diamond necklace; and a $81,000 Cartier white gold and diamond watch. All this activity is taking place with the expectations that consumers will return to luxury good purchasing behavior of the past.

One such shopper, Katherine McCormick, a New York photographer said, "I'm more in the mood to spend," as she tried on a $4,500 mink sweater at Royal Chie, a Manhattan boutique. McCormick expects to spend up to $20,000 on holiday gifts this year. This is approximately 40% more than last year. Additionally, consumers appear to be shopping for holiday gifts much earlier this year according to Brendan Hoffman, CEO of Neiman Marcus Direct.

Daniel Berry, a managing director at Merrill Lynch, expects an increase of around 4.9 percent for large upscale merchants. These same stores reported a decline of 1.1 percent only a year ago. Nevertheless, the increase in sales is not expected to return to the level of the 1990s when the dot-com boom created instant millionaires with plenty of disposable income. Gerald Celente, director of The Trends Research Institute, a research firm in Rhinebeck, N.Y. said, "We are seeing a slight uptick, but it is not going to be what it used to be." He sees the job market remaining sluggish and a much smaller pool of dot-comers in the market.

Given recent stock market gains and a lessened fear of terrorism, consumer confidence has been lifted, causing them to spend more freely than in the past. Coupled with other positive signs in the economy such as improved labor conditions and increased demand for capital goods, the gain in spending on luxury goods is one more sign that the U.S. economy is on the road to recovery.

(Updated November, 2003)


Discuss the role of "a lessened fear of terrorism" on luxury good expenditures.

2. Why are luxury goods some of the first to show signs of weakening sales during a recession?
3. Do you agree that increased purchases of luxury goods are an indication of economic recovery, since holiday sales generally increase anyway?
Source Associated Press, "Swanky Retailers Confident About Holidays," Florida Today, October 26, 2003.

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