Luxury Consumer Confidence and Spending Declines during Third Quarter 2004
Luxury goods consumption index drops 6.7 points to 96.0

Luxury consumers' confidence in the economy took a hit in the third quarter. After rising to 102.7 in the second quarter, the Luxury Consumption Index declined to 96.0, down 6.7 points, according to Unity Marketing's latest tracking study of the luxury market.

The Luxury Consumption Index measures the luxury consumers' feelings and attitudes about their financial well-being. The majority of luxury consumers (53 percent) felt their financial position was the same and no better than during the previous three months. Further, nearly 40 percent said the country as a whole was less well off in the third quarter.

"The market for luxury goods and services is driven by consumers' feelings, certainly not needs," says Pam Danziger, president of Unity Marketing and author of the new book Let Them Eat Cake: Marketing Luxury to the Masses — as well as the Classes. "Luxury consumers (average income $136.5k) with their surfeit of material wealth have no pressing need to go shopping when things don't look promising. Luxury consumers are in a unique position to wait it out when times are tough and that is just what they did in the third quarter."

Luxury Spending Drops in 3Q2004 and Predicted to Bounce Back in 4Q2004
In the third quarter only 19 percent of luxury consumers said they spent more on luxuries, as compared to 35 percent who spent more freely in the second quarter. The link between consumer confidence and spending among affluents was marked by a 35 percent drop in average spending.

Thomas Bodenberg, economic forecaster for Unity Marketing and former Conference Board executive, comments, "The period from July through September was one of weakness in the stock market, as tracked by the Dow Jones Industrial Average. Combine the flagging stock market with the political uncertainties from the presidential campaign and the affluent consumers simply decided to sit out the third quarter in terms of luxury shopping. However, the rapid rise in the stock market following the election predicts a strong fourth quarter for the luxury market."

This benchmark index of luxury buyers is calculated form a sample of over 700 upper-income households throughout the United States. This panel, with household incomes over $75,000 (one-third $150,000 or more) represents one of the largest longitudinal studies of high-end luxury consumption of goods and services. Panelists reported purchasing behavior of luxury goods and services over the past three months, as well as attitudinal and expectation data about luxury brands and categories, their households and the health of the economy in general.

Specifics included in Unity Marketing's Luxury Tracking Study are purchase incidence and spending, where purchases were made and expectations of future purchases on:

• Home Luxuries, such as electronics and photography equipment; linens and bedding; kitchenware, cookware and housewares; furniture, lamps and lighting and floor coverings and rugs; outdoor, lawn, patio and garden; kitchen appliances, bath and building products; home decorating fabrics, window and wall coverings; tabletop, dinnerware, flatware, servingware, figurines and decorative accents; and art and antiques.
  
  
• Personal Luxuries, such as clothes and apparel; fragrances, cosmetics and beauty products; fashion accessories; automobiles and jewelry and watches.
  
  
• Experiential Luxuries, such as fine dining; luxury travel; entertainment; and spa, beauty treatments and cosmetic surgery.

November, 2004 (About 100 pages) Published Price $2,500

(Please Note: With the purchase of this report, subscribers may apply subscription fee for 3Q2004 report to annual Luxury Tracking subscription)

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