Affluent Express Positive Outlook about the Economy and Their Personal Wealth
The assessment of current business conditions (index of 100) is a nice improvement from the Fall 2014 survey (88) and indicates a slightly more positive view of the current economy, especially given the volatility in the stock market and the political and economic uncertainty around the world at the time of this survey. Of course there were some similar conditions in existence at the time of the Fall 2014 survey also.
The index for future business conditions (105) declined a modest 2 points from the Fall 2014 survey. The index for change in the stock market (100) is 2 points above the Fall 2014 index. While remaining near or slightly above neutral territory, these indexes suggest some comfort among the millionaires about general economic conditions and a somewhat positive outlook about the next 12 months.
The index for expected change in after-tax personal income (97) was up 4 points from the Fall 2014 survey. This index is now approaching positive territory for the first time since Spring 2008.
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) rose a modest 2 points from the Fall 2014 survey and at 101 is in positive territory.
The general public seems to be even a bit more positive about the economy given the September Consumer Confidence Index (103) reported by The Conference Board. On the other hand, Spectrem Group’s Millionaire Household Outlook fell to an 18-month low in September.
Over a third (35%) expect their net worth (index of 119) to be higher in September 2016. The outlook for personal net worth and income is a positive factor for potential increases in spending.
The indexes for the change in spending for the 17 products and services tracked by these surveys are about the same as the prior two surveys in most cases. There was a modest increase (from 1 to 8 points) from Fall 2014 in 11 of the 17 categories, with domestic vacation travel, entertainment, and home entertainment equipment showing the largest increases. Dining in family/casual restaurants was unchanged. A decline of only one to three points was experienced by the remaining five categories.
Almost half (46%) of the respondents plan to acquire one or more of the 8 major items, which is a 2 point increase over Fall 2014. A substantial amount of additional potential purchases of the 8 major items are represented by the consumers that have yet to decide about a new auto, a cruise, a remodeling project, and the acquisition of a primary or vacation home (both of which showed some strength relative to Fall 2014).
Expectations regarding future income and net worth influence and/or correlate with spending plans. For example, the average index for changes in spending plans is 14 points higher (93 versus 79) for those expecting an increase or no change in their income versus those expecting a decline in income. The difference is 10 points (91 versus 81) based on net worth expectations.
With about a third (32%) of the affluent planning to defer or reduce expenditures during the next 12 months, this represents a small improvement of 1 point from Fall 2014 and a record low for this reading.
While the mood and spending plans of millionaires may have been negatively influenced in September by the increasing global tensions and the volatility and declines in the stock market, the recovery of the stock market during October would be a positive influence.
Some of the highlights of the special topics covered in this survey include: 97% of the millionaire households are forecast to spend an average of $2,773 for December holiday gifts, which is about a 7.7% increase over 2014 and represents a total of about $33 billion.
On average about 81% of the affluent say they will spend more or the same on holiday gifts this year versus 2014 and 20% say they will spend less. With the potential changes in spending estimated by those planning to spend more and those planning to spend less, the average spent on holiday gifts could decline 1.3% from 2014 spending. However, it appears the affluent spent in 2014 almost 3% more than they had anticipated in the Fall 2014 survey, thus supporting the premise that people, especially the affluent, often tend to spend more for gifts than they had planned.
The gift expenditure per millionaire household is about four times that of all households as estimated by the National Retail Federation (NRF) which has forecast a 3.7% increase in total retail holiday gift sales for this year. Deloitte has forecast a 3.5% to 4% rise in total holiday gift expenditures.
NRF research indicates gift cards have been the most requested gift item for eight years in a row. Almost 80% of the millionaires in this survey reported spending an average of $450 on holiday gift cards in 2014. This represents a $5.6 billion market (about 18% of NRF’s estimate of total gift card sales of almost $32 billion).
The millionaires in this survey also indicated giving about $19 billion in cash and checks as holiday gifts. It appears much of this gift “currency” could be converted to gift card sales if retailers offered a personal bonus reward for the purchase of gift cards. Over 90% of the millionaires expect to spend more in 2015 for gift cards and gift “currency”. About half of the respondents indicated they purchase gift cards online.
Another special topic in this survey was about awareness of, prior purchases from, and willingness to consider for a future purchase a list of 18 fine jewelry brands. Awareness ranged from a low of about 20% (Graff and Buccellati) to a high of 98% (Tiffany and Cartier). About a quarter of the millionaires were aware of only nine or fewer brands, and the average number of brands recognized was just under twelve.
Prior purchases of the brand ranged from a low of zero for Graff to a high of 50% for Tiffany. Only four brands were named by 20% to 27% of the millionaires (Chanel, David Yurman, Kay, and Cartier). All others were named by less than 20% of the millionaires.
Among the brands of which the respondent was aware, the brands that would definitely or possibly be considered for a future purchase ranged from a low of 14% (Graff) to a high of 50% (Tiffany). Of the remaining brands, the top three were David Yurman (49%) and Chanel and Cartier (both at 35%).
It appears that retailers and brands have a large untapped market opportunity for selling more gift cards by creating compelling reasons why people should give gift cards rather than “currency”. In addition, many of the fine jewelry brands have an opportunity to substantially increase awareness and thus sales potential among millionaires.
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