US luxury spending slows ahead of midterms, credit card data shows

US luxury spending has slowed ahead of the midterms, according to credit card data from retail lender Citi. The data showed a 6% decline in luxury credit card purchases in September compared to a year earlier, with declines of 4% in July and August. Luxury brands most exposed to the US, such as Tapestry, LVMH, and Ferragamo, are expected to remain relatively resilient, supported by wealth effects from higher-end consumers.

However, overall US luxury credit card spending showed weakness as the US prepares for the November 3 midterm elections. Citi's data, based on millions of credit card transactions, comes after surveys from the Conference Board and the University of Michigan indicated growing unease about the US economy. The upcoming elections often lead to heightened consumer and business caution due to political uncertainty.

Economists have noted that rising US Treasury yields and mortgage rates could further dampen economic activity. Morgan Stanley analysts have stated that the downturn in US luxury spending leaves brands with limited prospects for a return to growth after two years of contraction. Earnings reports from luxury groups, starting with LVMH's third-quarter sales on October 12, are expected to highlight weaker US demand.

Kering, the owner of Gucci, has warned of a slowdown in the US market, as reported by Italian brokerage Equita.