Key Takeaways
- US luxury spending is undergoing a significant recalibration, moderating from post-pandemic highs as “revenge spending” fades and economic realities set in for affluent consumers.
- A clear divergence has emerged between “hard” and “soft” luxury. Jewellery and high-end watches demonstrate resilience, viewed as stores of value, while discretionary categories like ready-to-wear and leather goods face notable declines.
- The slowdown is not uniform across consumer tiers; aspirational buyers are pulling back more sharply than the ultra-wealthy, forcing brands to reconsider pricing and accessibility strategies.
- Macroeconomic pressures, including the erosion of excess savings and potential trade tariff implementations, pose significant headwinds for European luxury conglomerates heavily exposed to the American market.
The post-pandemic euphoria that propelled luxury goods spending to remarkable heights in the United States is unmistakably fading. Recent data reveals a distinct cooling in American appetite for high-end items, with credit card spending across the sector declining through late 2023 and into early 2024. This trend signals not a market collapse, but a crucial recalibration, as the era of government stimulus and “revenge spending” gives way to a more discerning consumer landscape shaped by persistent macroeconomic pressures.
The Great Luxury Normalisation
After a period of supercharged growth, a return to more sustainable trends was inevitable. The slowdown became particularly apparent in the second half of 2023 and has continued into 2024. Analysis of Citigroup credit card data, for example, highlighted a 15% year-on-year drop in US luxury purchases in February 2024, following an 11% decline in July 2023 (1, 2). This is not a blip; it is the market finding its new equilibrium.
The primary driver is the changing behaviour of the aspirational, yet not supremely wealthy, luxury consumer. This cohort, who enthusiastically participated in the recent boom, is now demonstrating greater price sensitivity. With pandemic-era excess savings largely depleted and the cost of living remaining elevated, discretionary budgets are being scrutinised more carefully. The result is a bifurcation of the market: the ultra-high-net-worth individuals continue to spend, whilst the entry-level affluent are retreating.
A Divergence Between Hard and Soft Goods
Beneath the headline decline lies a critical divergence in performance between different luxury categories. So-called “hard luxury,” primarily fine jewellery and high-end watches, has shown remarkable resilience. In contrast, “soft luxury,” such as ready-to-wear apparel and leather goods, has borne the brunt of the spending pullback. This split suggests a psychological shift among consumers, who appear to be favouring items with perceived lasting value over more ephemeral, fashion-driven purchases.
The data paints a clear picture of this bifurcation. While overall luxury spending has faltered, jewellery has remained a consistent outperformer, suggesting it is viewed more as an investment or a timeless asset than a simple discretionary spend (3). This dynamic is captured in the contrasting category trends.
| Category | Performance Trend (Late 2023 – Early 2024) | Underlying Driver |
|---|---|---|
| Fine Jewellery | Resilient / Outperforming | Perceived as a store of value; less cyclical |
| High-End Watches | Stable to Modest Growth | Investment appeal and status symbolism |
| Leather Goods | Significant Decline | Highly discretionary; sensitive to fashion cycles |
| Ready-to-Wear | Significant Decline | High price sensitivity; first to be cut from budgets |
Macro Shadows and Corporate Implications
The slowdown is a direct reflection of the broader economic climate. While headline inflation has cooled, its cumulative effect has eroded purchasing power. This environment has significant implications for the European luxury giants—LVMH, Kering, and Richemont—for whom the US remains a pivotal market. Recent corporate earnings reports have repeatedly cited the softness in the American region as a drag on overall performance.
Furthermore, the spectre of geopolitical friction adds another layer of risk. Analysts at Bernstein have forecast a potential decline for the sector in 2025, specifically citing the turmoil that could be caused by new trade tariffs (4). Such policies would inevitably lead to price increases, further dampening demand from an already cautious consumer base.
A Hypothesis on Exclusivity
For investors and brand strategists, the path forward requires a nuanced approach. The one-size-fits-all strategy of relentless price hikes and expansion into accessible luxury may have run its course. The current environment exposes the fragility of relying on the aspirational consumer.
The most insightful takeaway may be what this trend implies for brand strategy. We could be witnessing the start of a great reset in luxury positioning. As the aspirational buyer steps back, the most successful brands may be those that double down on true exclusivity, intentionally narrowing their focus to the very top of the wealth pyramid. This would involve not just raising prices, but potentially reducing production, closing points of sale, and abandoning the chase for volume. The speculative hypothesis is that the future of luxury leadership will not belong to the biggest brands, but to the most disciplined and exclusive ones, effectively leaving the merely affluent to find new status symbols elsewhere.
References
1. Business of Fashion. (2024, March 1). US Luxury Purchases Fell 15 Percent in February, According to Citi Credit Card Data.
2. Business of Fashion. (2023, August 8). US Luxury Spending Down 11% in July, Says Citi.
3. Rapp, J. (2024, July 1). Jewelry Sales Outperform as US Luxury Spending Falters. CNBC.
4. CPP-LUXURY.COM. (2024). Luxury goods sector to decline 2% in 2025 amid tariff turmoil – Bernstein.
5. unusual_whales. (2024, August 2). [Post showing Citi data on US luxury spending decline]. Retrieved from https://x.com/unusual_whales/status/1819380961803518386
