Now that the 2024 forecasts for the luxury industry have been laid out (including that of FSW: https://lnkd.in/eD6FtP4v) we start the job of observing and acting on those trends. Looking a bit backwards in the hope that it gives a small glimpse of future trends, the U.S. and China released Q4 macroeconomic numbers this week that will be of interest to luxury industry watchers.
Today the U.S. released monthly December retail sales which showed us that, after 13 consecutive months of year-over-year declines, inflation adjusted growth was 1.4 percent – the first annual increase since October 2022. If we break out the types of spending that drove this growth (see chart below), we see that nominal annual growth rates were more than 10 percent for food, electronics, health/personal care, cars, and clothing. For luxury watchers, the department store number is worth a look, despite changes in wholesaling trends, and that was especially impressive with a month-to-month break out gain of over 3 percent – by far the biggest monthly winner. Some trends to bear in mind as we look forward to the start of the luxury earnings season over the next few days.
In China, there was no surprise from yesterday’s announcement that 2023 GDP growth came in at 5.2 percent, mostly in line with market expectations and slightly above the government’s target. What the financial press really picked up on was less that this was a fairly poor economic growth number, but the surprise announcement that the country’s population fell to 1.4 billion with births continue to fall. As we noted in our analysis of demography and the geography of luxury sales (https://lnkd.in/egusaCvc) this is a big deal with Asia, excluding China, comprising about 40 percent of industry sales and the region has generally been much more dynamic than the U.S. and Europe for a number of years. But the aging of Asia, especially China, will challenge both the growth of the industry and the way that the industry markets products. China’s working age population was nearly 15 percent in the mid-2000s and now it is below 5 percent, more like the U.S. and Europe.