In this half-year (H1-19) update briefing, we investigate the latest developments in the global luxury goods industry, with a focus on the macro-economic and demographic changes and what these mean for our view of a likely outlook for luxury goods in the short to medium term. Whilst the luxury goods industry is not immune to global headwinds, our research for H1-19 shows that the industry overall is bucking the slowing global macroeconomic trend, albeit with some categories being impacted.
Despite looming threats of a trade war and increased global economic uncertainty, the forecasts for luxury goods spending in 2019 remain unchanged. However, dark clouds are gathering over the global economy, impacting consumer confidence, particularly in advanced economies.
The US-China trade dispute continues to escalate, with further tariffs imposed in May 2019. The effect of the US-China dispute has already had a significant negative impact on economic growth and sent shockwaves through the luxury industry, with investors remaining cautious.
Global wealth expansion will continue to play a major role in the outlook for the luxury market. Indeed, thanks to their rising numbers and wealth accumulation, the world’s wealthiest 1% are expected to continue with, if not increase, their consumption of luxury goods, regardless of the global macroeconomic conditions.
Thanks to a combination of growing prosperity, coupled with changing consumer habits, the luxury travel industry is witnessing greater opportunities across a wider range of geographies. Many key luxury players, hotels and retailers will continue to benefit from wealthy tourists’ desire to travel and shop for luxury products.
The performance of sales of global luxury cars, which account for the lion’s share of the market, was disappointing in 2018, with the worst year-on-year performance since 2008. On the flip side, the personal luxury goods market is set to continue to perform well, with stable growth. In turn, this will hold up the overall industry.
High income earners are clearly driven by a desire to spend on experiences. With this, luxury is becoming more than just a price point, but a state of mind that luxury brands embody as consumers continue to seek truly authentic experiences.
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