Whilst pent up savings and demand, as well as improved consumer confidence, will help to support recovery, the luxury industry still faces huge challenges, not least as consumers are saving rather than spending and many major economies are still subject to significant lockdown measurers. Vaccines, effective containment measures and reliable national healthcare will all be needed to improve the economic outlook in luxury, but pre-COVID-19 revenues are not expected to be fully recovered until 2022
Many economies were still subject to significant social distancing and economic activity restrictions in Q1 2021. Whilst there is a general consensus across the industry that pent up savings and demand, as well as improved consumer confidence, will help to support recovery, the luxury industry still faces huge challenges, not least that more consumers are saving rather than spending. Vaccines, effective containment measures and reliable national healthcare will all be needed to improve the economic outlook in luxury.
Several key markets in Europe continue to implement tighter COVID-19 rules to curb the resurgence of the virus. These, along with a much slower than anticipated EU vaccination roll-out programme, are restraining recovery across key luxury goods markets. With bans on non-essential travel in place across several markets, foreign demand (a key growth driver in markets such as Italy, France and the UK) remains heavily disrupted and adding to the challenges ahead.
Asia Pacific continues driving sales and remains the most important region overall for luxury goods, making up almost half of all spending. Much of this spending has been driven by China’s middle, wealthy and affluent classes. That said, China’s wealthy and affluent population as a whole is set to contract, with no rebound to pre-COVID-19 levels until 2024.
Forecast growth rates to 2025 as part of this Q1 2021 quarterly update show that high-end references, such as luxury travel and experiential luxury, as well as luxury cars, are exposed the most. Their non-essential nature and higher than average income elasticities are the main drivers behind this macroeconomic-led update.
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