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Time to indulge in luxury?

By Judy Martel · Bankrate.com
Friday, February 25, 2011
Posted: 3 pm ET

During the recession of 2009, even the wealthy held back their discretionary spending on luxury amid fears and uncertainty about the direction of the economy. But the latest data from Mastercard Advisors SpendingPulse shows that sales of luxury items are up 6.1 percent in January from a year ago. Luxury brands are also reporting strong fourth-quarter earnings.

I saw some evidence of a pickup in luxury-buying over the President's Day weekend, when I made my annual trek to the Miami International Boat Show, which this year coincided with the Coconut Grove Arts Festival (also in Miami). Vendors at both Miami area events say sales were up, and more art and yacht exhibitors were in attendance this year. Buyers were less deterred by high prices, hotels in the area were booked and area revenue was up 15 percent from last year, according to an article in the Miami Herald. From my perspective, the boat show certainly seemed more crowded and upbeat this year, with nearby restaurants brimming and more prospective buyers in serious discussions with yacht brokers.

Spending on luxury goods is dependent on disposable income, but it also indicates confidence in the economy, as demonstrated when those with disposable income pulled back during the downturn. Typically, when demand is high, economic times are good. Bankrate's tracking of retail sales, released monthly by the Department of Commerce, also shows slightly improved retail spending overall.

Before the recession, when credit standards were loose and many in the middle class were feeling flush, they were "spending up" (sometimes called "aspirational spending,") in order to look wealthier. It doesn't appear we've returned to the days of irrational exuberance yet. A better economic outcome would come from steady, solid growth.

Do you feel the urge to spend on luxury, and is your confidence in the economy improving?

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1 Comment
Frank
February 25, 2011 at 7:56 pm

The economy may be starting to improve, however as I work as a credit counselor I see the Effect it is having on the consumers. It seems that more and more often we have to refer people to a lawyer for Bankruptcy because they do not bring in enough income to cover a monthly payment. So maybe those of of you who make $100,000 plus each year can say the economy is better. But the most of us are getting hit harder then ever. Prices go up income goes down. Does that saound like a better economy to you?