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|Affluent Turn Cautious in Outlook for Personal Spending and the Economy
The Affluent Market Tracking Study #8, the just released Fall
2005 report in a continuing series of twice-yearly surveys by
The American Affluence Research Center (AARC), reveals several
important changes in the 12- month economic outlook and spending
plans of the wealthiest 10% of Americans, the 11 million
households representing about half of all consumer income and
spending and a third of the total US economy.
While the affluent still have a somewhat positive outlook toward
current business conditions, their outlook for future economic
conditions is now neutral. This may reflect concern about the
potential negative economic consequences of the Gulf coast
hurricanes (risk of increased inflation, higher interest rates,
and a recession) that dominated the news media in September,
when the survey was conducted.
The affluent are far less positive than they were six months
ago, continuing a decline that began in Spring 2004 after
reaching a record high in the Fall 2003 survey. The composite
Affluent Consumer Expectations (ACE) index for economic
conditions 12 months from now had set a record low this past
spring at 116 and has now dropped further to the neutral level
The affluent also indicated modest declines in their plans for
major purchases and their expected changes in spending for 17
different products and services. Their projected $57 billion in
expenditures for holiday gifts (25% of the estimated total
holiday gift market) is 1.6% below 2004 spending levels. This
contrasts with a 5% increase projected in an early October
survey of the total adult population for the National Retail
There is some indication of a reduction in the plans for major
expenditures in the next 12 months, with 44% of respondents
reporting no such plans. Plans for home remodeling, cruises, and
acquisition of vacation residences declined from their Spring
2005 record highs. Plans
to acquire motor vehicles and boats
showed slight increases, while plans to purchase an existing
home as a primary residence increased to a record high.
The AARC surveys track spending plans over the next 12 months
for 17 categories of goods and services, including major
appliances, home computers, furniture/furnishings, entertainment
equipment, casual and upscale dining out, entertainment,
recreation, domestic and international travel, designer and
non-designer apparel, collectibles, fine jewelry, and political
and charitable contributions.
Of the 17 future spending indexes, only four are at positive
levels. Of the 13 categories with negative indexes, 11 declined
from their Spring 2005 level. The Future Spending Index average
(91.8) is at its lowest level since tracking began in Fall 2003.
Approximately two-thirds of the respondents expect to spend the
same amount for holiday gifts this year as last year. The number
who expect to spend "less" (21%) this year is about double the
number who expect to spend "more" (11%).
This information is based on a national survey of 448 men and
women in the wealthiest 10% of American households. The survey
participants have an average income of $308,000 and an average
net worth of $2.7 million. The survey has a 5% margin of error
at the 95% confidence level.Highlights of the survey can be
found at the AARC website www.affluenceresearch.org
About the author:
Ron Kurtz is a principal of The American Affluence Research
Center and The Management Resource Group. Both companies provide
marketing research and strategic planning services to prominent
clients in the travel and hospitality industries, especially
those targeting the affluent market. Ron earned his MBA at
Harvard Business School.
For further information: http://www.affluenceresearch.org and