US luxury spending falls ahead of US midterm surveys: What Citi data says affluent shoppers are wary

U.S. spending on luxury goods fell for a third straight month in September, indicating growing caution among U.S. shoppers, even as luxury brands continue to rely on the country’s affluent consumers to offset weakness in other major markets.

Overall, U.S. luxury credit card purchases fell 6% year-over-year in September, following 4% declines in July and August, according to Citi. The data is based on millions of credit card transactions.

The slowdown comes as the U.S. heads to midterm elections on Nov. 3, with surveys by the Conference Board and the University of Michigan showing growing concern about the U.S. economy.

Why American luxury spending matters

Luxury brands, weighed down by lingering weakness in China and the economic fallout from the Iran war, have pinned their hopes on resilient demand from wealthy American shoppers, including a growing cohort of AI millionaires, to offset softer sales elsewhere and help lift the sector from a prolonged slump.

While continued growth in wealth among affluent consumers fueled the market’s top in September, overall U.S. luxury credit card purchases fell 6% from a year earlier, after falling 4% in July and August, Citi analysts said in a survey.

Luxury brands with the most exposure in the US include Tapestry, owner of Coach and Kate Spade; the French conglomerate LVMH, known for brands such as Louis Vuitton and Tiffany; and Italy’s Ferragamo, they said.

The broader decline in spending suggests that even wealthy shoppers are becoming more cautious.

What do wealthy Americans spend less on?

Citi data shows a mixed picture across luxury categories.

Spending on leather goods and ready-made goods gradually improved in September. However, spending on watches and luxury jewelery continued to deteriorate.

Luxury brands have also raised prices this year. Most soft luxury brands selling clothing, shoes and leather goods increased prices by low single-digit percentages. This was slightly below the low to mid-single digit price increases realized by watch and jewelry manufacturers.

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What the midterm elections may mean

The slowdown in spending comes against a backdrop of heightened economic uncertainty. The upcoming US election is often associated with increased caution among consumers and businesses as political uncertainty can affect spending decisions.

Economists also point to rising U.S. Treasury yields and mortgage rates as factors that could further cool economic activity.

The weakness could make it harder for luxury companies to make the recovery investors have been waiting for after two straight years of decline.

Analysts at Morgan Stanley said in September that the decline in US luxury spending leaves little room for brands to make a long-awaited return to growth.

what’s next

The upcoming earnings season will provide a clearer picture of whether weakness is spreading across the luxury industry.

Widely regarded as the sector leader, LVMH is scheduled to report third-quarter earnings on Oct. 12. Gucci owner Kering reports on October 22 and has already indicated that investors should expect a slowdown in the US market.

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For luxury brands, Citi’s September data suggests that the US consumer may no longer be an unlimited source of growth — even at the affluent end of the market.