Affluent Americans are hopeful but cautious

October 14, 2009 -- A new survey of the wealthiest 10% of US households by the American Affluence Research Center shows the affluent have a negative opinion of current business conditions but have a positive 12 month outlook for improvements in business conditions and the stock market.

Concerns about their personal household income are contributing to weakness in their plans for December holiday gift purchases, which they estimate will average about $2,400 or a 5% decline from what they spent in 2008.

Spending plans over the next 12 months for 8 major items and 17 different categories of products and services have improved since the Spring 2009 survey, but they continue to be soft in comparison to prior year reports in this 8 year series of twice-yearly surveys.

The survey provides insights into the concepts of the “new normal”, “stealth wealth”, and “luxury shame” that are contrary to the anecdotal examples that have appeared in recent media coverage of the luxury market.

Most of the affluent expect to return to pre-recession levels of spending once they are convinced the recession is over and they see a recovery in their net worth, which has been hit by declines in the value of their savings and their home. They do not expect to see the end of the recession, with real improvements in the rate of unemployment and the value of their savings and their homes, for about 18 to 24 months and possibly in to early 2012.

The survey results are based on a national sample of 684 respondents who are representative of the wealthiest 10% of Americans, over 11 million households that account for about half of total consumer spending and a third of the gross domestic product.

12 month outlook for spending on 8 major items and 17 products and services

  • Spending plans are generally higher than they were 6 months ago but still showing no real increases in comparison to the prior year
  • Majority still say they are reducing or deferring expenditures due to current economic conditions (76% vs 81% in the spring)
  • 48% (vs 54% in the spring) say the reason for reducing/deferring expenditures is because “they want to spend less and save more”; this is particularly true among the younger respondents with higher levels of income but lower net worth
  • Uncertainty about the economic recovery, uncertainty about job security and/or compensation, and concern about the decline in net worth are other major reasons for reducing/deferring expenditures.

Factors that will influence a return to pre-recession levels of spending:

  • 20% say they have not reduced their spending
  • Of the 80% who have cut back, about a quarter say they will not return to pre-recession levels of spending
  • The recovery of net worth (the stock market and the value of their personal savings and their home) are the key to a return to pre-recession levels of spending
  • Only 5% say easier credit will be important to increased spending.