Inflation Or Not, Americans Still Buy Luxury Goods

Persistently high inflation has changed the behavior of some American consumers. But when it comes to luxury goods, Americans are still splurging.

U.S. inflation reached a multi-decade high of about 9% in the summer of 2022, and while the pace of inflation has slowed, prices haven’t exactly come down. Some consumer companies, such as McDonald’s (MCD) are saying people are changing their buying behavior in response. This is particularly true of lower-income earners.

Yet, sales of luxury goods are booming, not least because people believe they are a good investment.

Luxury Leap

The appetite for luxury goods has grown significantly over the past three years, according to research and data analytics firm YouGov , with those aged 25-44 leading the way in terms of spending.

The percentage of Americans planning to purchase luxury goods in the next 12 months has grown by 12 percentage points to 26% this year, from only 14% in 2021.

It gets really interesting when we look at who these future luxury shoppers are: The trend appears particularly pronounced among Americans who have reached key milestones in their finances and lives. Nearly half (47%) of these potential buyers are parents or guardians, while more than a quarter (26%) have at least $5,000 in disposable household income. Perhaps most significantly, more than half of prospective luxury goods buyers (53%) expect their household financial situation to improve over the next 12 months.

Spending Split

The data are reinforcing a story of a two-tier economy: One level includes consumers who are able to compensate for the higher prices on virtually everything, while another includes Americans who have been hit harder by the high inflation of the past years. It’s a story of inequality in the face of the same economic reality.

Credit card debt levels and delinquency transition rates are on the rise for lower-income Americans, leaving the spending-driven economy for high-earning consumers to sustain.

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