The US economy is increasingly dependent on the consumer attitudes of wealthy Americans and on their expenses. However, it turns out that perhaps the days when the wealthy residents of the country spent like last time are coming to an end.
Americans are getting rich
The financial condition of American households has increased in recent years despite high inflation and rising interest rates to keep it under control. This, in turn, made lending in the US more expensive.
A report by the Federal Reserve Board indicates that the increase in the average value of stocks traded in the US stock markets, combined with rising housing prices in the country, increased the wealth of Americans between 2019 and 2022.< /p>
This trend is known among economists as the "wealth effect".
"The Wealth Effect" means that many US consumers have had enough money to spend on expensive tourist trips and the purchase of luxury goods.
Accelerating US economic growth in 2023 largely driven by rising US consumer spending, analysts say.
"The Wealth Effect" continues to weigh on the US economy as stock averages hit new record highs and high bond yields boost savers' incomes, according to CNN.
More than 70 percent of total U.S. household wealth is owned by people over the age of 54, according to a Federal Reserve Board survey.
However, the U.S. economic recovery has slowed somewhat recently amid weaker-than-expected April employment and retail sales data.
The rich limit their spending
The US economy remains generally stable, including the unemployment rate, which is below 4 percent. However, certain signs indicate that the country's economic situation is facing some negative factors.
One of these factors is the changing consumer attitudes of wealthy Americans.
The latest financial reports from some luxury goods companies are a sign that wealthy people in the US are starting to become more cautious when spending their money, notes CNN.
The British company "Burberry" (Burberry) announced earlier this month a 40 percent fall in profit on a year-on-year basis in the financial year that ended at the end of March. The luxury chain's U.S. sales were down 12 percent from the previous fiscal year.
"Achieving the planned results, against the background of slowing demand for luxury goods, proved to be a real challenge for us," says the CEO of "Burberry" Jonathan Akeroyd.
The world's largest corporation for luxury goods - the French group "Louis Vuitton Moët Hennessy" - LVMH announced in its latest financial report that it has reported a sharp decline in demand for expensive alcoholic beverages in the United States.
El Ve M Ash is a producer of the famous brands of champagne "Moet et Chandon". (Moët & Chandon) and "Dom Perignon" (Dom Perignon), as well as the majority owner of the company that produces the famous cognac "Hennessy" (Hennessy).
The largest US retail chain "Walmart" (Walmart) has traditionally targeted lower- and middle-income Americans. Last week, however, the corporation announced that its profit in the first quarter of 2024 was "primarily driven by higher-income households" earning more than $100,000 a year.
The data of "Walmart" and luxury goods companies are a sign that more and more affluent Americans are thinking about what they spend their money on and are moving toward cheaper goods, experts say.
You only live once
It should be noted that not all wealthy Americans have begun to restrict themselves when they spend their money.
The cruise company "Royal Caribbean Cruises" (Royal Caribbean Cruises) announced that its revenue in the first quarter of the year was higher than expected. This has happened thanks to the unceasing interest of wealthy customers who wish to travel on its cruise liners. The significant expenses they incur on board the ships of "Royal Caribbean Cruises" have also contributed to the good results of the company.
One of the reasons for the stable consumer interest in companies from the luxury market segment is that a number of more affluent consumers have adopted the life maxim - "you only live once". This is stated by Luca Scola, who is a senior analyst at the private asset management firm "Bernstein" (Bernstein), specializing in investments in luxury goods.
Luca Scola notes that a number of financially capable consumers have realized that "life is short and their money will mean nothing to them when it ends".
"Because of this, some of us have acquired the feeling that we need to catch up on the entertainment opportunities we missed during the pandemic,", the analyst points out.