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- 4 Nov 2010
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New Survey of Affluent and Luxury Consumers Shows Who is Spending and for What

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Ron Kurtz, president of the American Affluence Research Center, elaborates on a survey of wealthy US households which predicts spending well above the historic lows of 2009 but below pre-recession levels


This is the 18th in a continuing series of twice-yearly surveys of the wealthiest 10% of U.S. households, based on net worth, as determined by Federal Reserve Board research.

Generally continuing the improved spending outlook first evident in its Spring 2010 survey, the results of this new survey by the American Affluence Research Center show few changes in future spending plans despite a dim outlook for the economy, the stock market, and personal income among certain groups of affluent and luxury consumers.

Similar to the Conference Board’s September consumer confidence index for the general public, this new survey of the wealthiest 10% of US households shows the affluent have a relatively negative 12 month outlook for business conditions and their personal income.

The Fall 2010 Affluent Market Tracking Study #18 is representative of the 11.4 million households that account for about half of all consumer spending and represents the estimated potential purchase during the next 12 months of 1.8 million autos, 1.7 million home remodeling projects, 2.7 million cruises, 353,000 vacation homes, and 673,000 primary residences.

Special questions in this survey reveal which segments of the affluent are making a general effort to reduce or defer expenditures, and the reasons for doing so, and which segments are continuing to spend at a strong pace. This survey included questions on specific spending plans for Christmas and Hanukah gifts.

This survey also contained a series of questions to identify which segments of the affluent market are planning the major remodeling of their kitchen or master bathroom during the next 24 months, how much they might spend for such remodeling projects, where they would make most of the necessary purchases, and the types of items to be purchased, e.g. counter tops, cabinets and vanities, floors, EnergyStar appliances, and water efficient toilets, heaters, and fixtures.


Overview

The Affluent Market Tracking Study #18, a survey of the wealthiest 10% of U.S. households, predicts slightly lower spending during the next 12 months reflecting their skeptical outlook for the economy and personal household income. Plans for changes in spending are well above historic lows established in the Spring 2009 survey but remain below pre-recession levels.

Given the very negative rating of current business conditions by the affluent, their modest expectation of some improvement during the next 12 months is not particularly optimistic. They also show little enthusiasm for anticipated changes in the stock market and their personal household income.

Changes in spending plans for 8 major items and 17 different categories of products remain soft compared to prior reports in this 9 year series of twice-yearly surveys. This reflects continuing caution and concern among some affluent.


Detailed Findings

• The composite ACE 12-month Economic Outlook Index (which is the average of the 12- month outlook for business conditions, the stock market, and household income) declined by 15 points from the prior Spring survey and moved into slightly negative territory (97).

• The absence of plans for major expenditures during the next 12 months (“none of the above”) had been relatively stable (43%-46%) prior to the Spring 2008 survey. Since then, the absence of plans for a major expenditure has ranged from 55% to the 60s. In the current survey 61% say they have no plans to make any of the major expenditures during the next 12 months (a 6 point increase from the prior survey).

• Most of the individual items show very little change from the prior Spring survey and some even show a slight increase (though the numbers are very small). Interest in acquiring a primary residence, in total, increased over the Spring survey (due to plans to build) and is at a level not seen since the Fall 2007 survey.

• None of the 17 spending categories is in positive territory (i.e., index of 100 or more). With the exception of dining in casual/family restaurants and recreational activities, the index for all of the categories was down from the prior Spring survey, typically by 3 to 5 points. This suggests some retrenchment from the increased spending plans that seemed to be associated with evidence of “frugal fatigue” in the Spring survey.

• In 13 of the categories, 25% or more said they plan to spend less during the next 12 months than they did during the prior 12 months. There were 11 such categories in the Spring survey.

• In 12 of the categories, two-thirds or more plan to spend the same or more during the next 12 months. There were 16 such categories in the Spring survey.

 About 41% of the affluent say they will make a conscious effort to reduce or defer expenditures during the next 12 months. 

• About 41% of the affluent say they will make a conscious effort to reduce or defer expenditures during the next 12 months. Their specific spending plans for 8 major items and 17 products and services are very different from those who say they are not reducing expenditures.

• Almost one in eight do not plan to buy December holiday (Christmas and Hanukah) gifts this year. This is a slight increase from the Fall 2009 Survey (about 9%) and well above the pre-recession 2006 survey (3%).

• Among those who plan to buy December holiday gifts in 2010, the average total expenditure of the adults in their household was $2,399 in 2009. This compares to an average expenditure of $2,505 reported for 2008 holiday gifts in the 2009 survey.

• Among those who expect to buy holiday gifts in 2010, about 3% plan to spend more than in the prior year (the same % as in the 2009 survey), 29% expect to spend less (down from 38% in the 2009 survey) and 69% plan to spend the same (up from 59% in the 2009 survey). Surprisingly, some of those who say they are making a general effort to reduce expenditures are planning to spend more for holiday gifts this year.

• Those planning to spend more report an average 7.7% increase, a decline from 12.4% in the 2009 survey. Those planning to spend less report an average 14.9% decrease, about the same as the 15.2% reported in the 2009 survey. Allowing for those who plan to spend the same, the average holiday gift expenditures are estimated to decline 3.9% from 2009 levels. This results in an estimated average of $2,305 for 2010 holiday gift expenditures per affluent household or a total market of $23 billion in potential purchases.

• The number definitely planning to remodel their bathroom (11% or 1,254,000 households) during the next 24 months is a bit higher than the number planning to remodel their kitchen (8% or 912,000 households).

• The undecideds (i.e. not sure) represent a large potential market almost double that of the definite remodelers.

• Age of room appears to be a useful indicator of when people are a good prospect for remodeling their kitchen or bathroom.

• A design specialist was named most often as the primary source for most of the purchases for a major kitchen or bathroom remodeling project. Home Depot, followed by Lowe’s, was the second most frequently named source.

 Surprisingly, some of those who say they are making a general effort to reduce expenditures are planning to spend more for holiday gifts this year. 


The survey is based on a national sample representative of the wealthiest 10% of Americans, about 11.4 million households that account for half of total consumer spending and a third of gross domestic product.

This report is based on the responses from 439 men and women in households with an average annual income of $290,000, an average net worth of $3.1 million, average

The survey respondents represent 31 states and the District of Columbia. Ninety (91) percent are married. The average age is 57. Sixty-four (64) percent are males and thirty-six (36) percent are females.


Ron Kurtz, President and Owner, American Affluence Research Center

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The American Affluence Research Center was established in 2001 to provide unique, highly effective marketing research, mailing lists, and consulting services to businesses and organizations targeting the affluent market.

www.affluenceresearch.org