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article imageIf You Have to Ask, You Can't Afford It

By unusualsuspect     Aug 18, 2007 in Business
Stocks may drop and bonds may bounce, but the wealthy can still pay for their little trinkets without blinking an eye. That's the good news in a shifty economy that's seeing a rapidly rising cost of living and thousands of mortgage foreclosures.
" 'Luxury goods still have quite a lot of momentum,' said Kamalesh Rao, director of industry research at SpendingPulse, the retail data service of MasterCard Advisors." In fact, July sales of luxury goods were up 10.7% over last year. And the picture is looking good for an increase of eight or nine percent in August.
No need to mourn for the jewelers, couturiers and yacht builders. California Coast Yachts has a two to three year backlog of orders for its luxury yachts. " 'The high-end luxury market has never, ever been as brisk -- and that's globally,' said Steve Lehman, the company's chief executive. 'We really haven't seen (our buyers) be affected by market swings.' "
While New Yorker Terry Gallo is shopping in the designer shoe department at Saks, the rest of us aren't even buying enough to keep Wal-Mart happy. The chain's CEO, Lee Scott, has been widely quoted this week, saying it's "no secret that many customers are running out of money toward the end of the month."
Consumer trust in the economy dropped this month to its lowest point in a year. Auto sales have fallen for seven straight months, a record, and consumer spending overall stagnated from February to July. That's not a good sign for the bean counters whose job it is to predict future economic growth.
How bad would the economy have to get before the rich had to pay attention to the price tags? The Luxury Institute, a research firm, estimates that it could take a drop in net worth of about ten percent for most people, though about a quarter said that they could take a hit of 20 to 29 percent before they felt it enough to cut back. Milton Pedraza, CEO of the Luxury Institute, said " 'Young, wealthy consumers with a lot of income but no net worth (would) pull back, no question. They would begin to prioritize: Do I really need to buy the 500 version of the BMW? Maybe I better pull back to the 300 series.' "
Let's hope that nobody has to make such hard choices. After all, your choice of BMW could affect your image.
Did some one just say there's a big sale at Wal-Mart?
More about Luxury goods, Economy, Rich
 
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