The Splurge Surge: Luxury Spending on the Rise

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People a window display at the Bergdorf Goodman in New York City.

Wealthy Americans don’t really think that good times are here again for the economy. But they’re going on shopping sprees anyway, with increasing sales seen for luxury hotel stays, high-end automobiles, and more.

The 2013 Survey of Affluence and Wealth in America, conducted by American Express Publishing and the Harrison Group, asked 1,416 Americans in the 10% income bracket about their spending habits and lifestyle decisions, as well as their thoughts on the state of the economy. Of those surveyed, the vast majority (76%) believe that the recession hasn’t actually ended. “Despite the clear consensus from economists that the recession is over, affluent and wealthy consumers do not believe that a real national recovery — neither economic nor emotional — has occurred,” Jim Taylor, vice-chairman of the Harrison Group, observed in a press release.

Regardless, the well-off say they expect to pick up spending this year in key discretionary (read: splurge-y) categories such as travel, electronics, jewelry, and automobiles. Compared to the first quarter of 2012, there has been a notable rise in wealthy Americans expected to spend more on luxury hotels and resorts (up 17%), home entertainment and electronics (up 17%), watches (up 10%) , and automobiles (up 18%).

(MORE: A Nation of Renters: Should We Be Worried That Fewer Americans Own Homes?)

The two survey results may seem at odds: If this group is of the belief that the economy remains shaky, why the eagerness to splurge? Are they simply trying to do their share to spread some money around and help economic recovery?

The recently released Pew Research Center report may offer some explanation. The study showed that from 2009 to 2011, the mean net worth of households in the top 7% rose by 28%, while everyone else collectively saw their wealth drop by 4% over this same time span.

So it makes perfect sense for the wealthiest households to be unimpressed with the economic recovery as a whole, and yet to personally be game to increase discretionary spending. While the poor (and the middle-class) have gotten poorer, the rich feel like they can splurge even more than usual because they have gotten significantly richer, largely thanks to the stock market taking off. “It has been a very good recovery for those at the upper end of the wealth distribution,” Paul Taylor, executive vice president of the Pew Research Center and co-author of the report, told the Washington Post. “But there has been no recovery for the lower 93, which is nearly everybody.”

(MORE: Financial Independence? Today’s Young People Don’t Expect It Anytime Soon)

Wealthy Americans aren’t merely saying that they’re spending more; by most indications, they actually are splurging more lately. In recent months, consumers who are well-off (or who merely want to appear so) have been picking up the pace on all sorts of luxury purchases. Businessweek cited data indicating that while the “luxury baby market”—that is, the luxury baby product market, not one involving sales of actual babies, luxurious or otherwise—declined a hefty 9.2% during the recession, but has rebounded recently. By 2014, the category is projected to hit $10.6 billion in sales, up from $9.4 billion in 2008.

Harley-Davidson motorcycles, which run $8,000 and up, have experienced rising sales after the recession caused a sharp fall-off in demand. According to CNN Money, the company forecasts sales of around 250,000 bikes this year, up from 223,023 in 2009.

Likewise, luxury automakers such as Bentley and Porsche haven been reporting rising sales in late 2012 and early 2013.

(MORE: A Bentley Boom? Rising Sales for Luxury Automakers Like Bentley, Jaguar, Porsche)

Spending on high school proms has increased as well, hitting an average of $1,139 per attendee this spring. Curiously, however, surveys show that less affluent families actually tend to spend more on the prom: The average student living in a household with less than $50,000 of annual income spends $1,245 on prom, compared to $1,129 for students with parents earning over $50,000.

5 comments
paulgeorges
paulgeorges

Fantastic when poor people lost their home,work,wife........More rich and more poor........Wall street up to the star and middle class to abyss......More taxes to average people and less to wealthy.........More louis Vuiton bags to some and more jail rooms to others........What a wonderfull world indeed ,at least for some !

nerdy88
nerdy88

It  so happens that the poorest people spend the most. Isn't that a little ironic! but at time perhaps the choice is blurred! We all want to live a rewarding and comfortable life. The choices that determine that are at times unavailable to the masses.

You make a choice daily to live your life and go to work, while saving money on the side but who is in charge of the economy? Not me and not you SO we have to rise above and beyond and live the lives of luxury that we all deserve at the same time not lose track of the less fortunate.

More ways to get rich and live luxuriously are here http://funwebmoney.blogspot.com

i don't meant to bombard you with information but follow the link and it may change your life! it changed mine!

ClintonMcDade
ClintonMcDade

Concern about the economy is for the little people.