US luxury spending is falling ahead of US midterm polls: What Citi’s data tells about wealthy shoppers turning cautious

US luxury spending declined 6% year-on-year in September, according to data from Citi. This represents the third consecutive month of decline, with purchases falling 4% in July and August as well. The downward trend comes as the US prepares for the November 3 midterm elections, with surveys indicating growing economic unease among consumers.

Luxury brands have traditionally relied on wealthy US shoppers to offset weakness in other markets, but overall credit card purchases fell 6% compared to a year ago. Among the brands most exposed to the US market are Tapestry, LVMH, and Ferragamo. While spending on leather goods and ready-to-wear items improved in September, luxury jewellery and watch sales weakened further.

Luxury brands have also raised prices this year, with soft luxury brands increasing prices by low single-digit percentages, slightly below the higher increases seen from watch and jewellery makers. The decline in spending is attributed to increased economic uncertainty leading up to the elections, rising US Treasury yields, and mortgage rates.

This may make it harder for luxury companies to achieve the recovery they have been seeking after two years of contraction. Morgan Stanley analysts have noted that the weak US luxury spending leaves brands with little potential for a long-awaited return to growth.