October, 2012 – This article from Evins discusses how the presidential election and the fiscal cliff will affect the spending of the affluent in 2013. (http://evins.com/aperture/?p=429)
By Rachel.Lamb
Despite turbulent business and stock market performance, consumer confidence is relatively high. However, the upcoming U.S. Presidential Elections and the fiscal cliff will be the real indicators for how affluent consumers will be spending in the upcoming year, according to research from American Affluence Research Center.
The fiscal cliff, a term for the chatter surrounding the upcoming laws to be in effect January 2013 including the Budget Control Act of 2012, is setting consumers into a tizzy mainly about whether or not they will have increased tax cuts. At the same time, laws proposed by both President Barack Obama and presidential hopeful Mitt Romney will likely play a role in whether or not customers are spending in the next year.
“I think a Romney victory could create some short term optimism that could contribute to some modest increase in spending,†said Ron Kurtz, president of American Affluence Research Center. “The bigger factor will probably be what congress does about the fiscal cliff that we face in early January, which I think will be the more important factor influencing the mood and spending of the affluent.
“[However], while the affluent have a very negative view of current business conditions, their 12-month outlook for business conditions, the stock market and their personal net worth is relatively positive,†he said.
Approximately 42 percent of the affluent report an affiliation with the Republican Party with 29 percent identifying as Democrats and 29 percent undecided. Along those lines, Romney is the choice of 48 percent of the affluent, Obama at 35 percent and 16 percent undecided.
Key issues among those who will vote for Romney are plans for economic recovery, balancing federal budget, plans for new jobs and reducing federal debt.
Meanwhile, the big issues for pro-Obama voters include universal health care, plans for economic recovery, Medicare program and pro-choice.
Obviously the most-important issues for Democrats and Republicans are different, and the gaps are increased with Independent or undecided voters.
Issues most important to undecided voters include economic recovery, reducing federal debt, reducing federal budget, changes in income taxes and plans to create new jobs.
Romney voters have, on average, about 10 percent higher income and 25 percent higher net worth than undecided or Democratic affluent consumers.
Despite the uncertainty in politics and in the fiscal cliff, affluent consumers are still expected to spend approximately $22.3 billion this holiday season.
“Affluent consumers are planning to maintain or slightly reduce spending in most of the 17 product categories and eight major expenditures that were tracked,†Mr. Kurtz said.
In the next 12 months, approximately 21 percent of consumers intend to purchase or lease a new motor vehicle.
Fourteen percent intend to have a major remodeling done to their house, but only 2.3 percent plan on buying a new home and 1.7 percent intend to build a new house.
Only 1.4 percent of affluent consumers intend on buying a new vacation home and even less at 0.5 percent intend to build a new vacation house.
Approximately 14 percent intend to take a cruise and 1.5 percent intend to purchase a new power or sailboat.
About 59 percent of affluent consumers do not intend to spend on any of the major categories, which is the same as the last survey in the spring.
In addition, a majority of consumers either pledged to spend the same or slightly less on vacation travel, leisure activities, home durables, apparel and accessories and political/charitable contributions.
All in all, marketers should realize that customers are intending to spend on run-of-the-mill products in addition to big-ticket purchases.
“The top one percentile, those with a net worth of $6 million-plus, are expecting to maintain their spending,†Mr. Kurtz said. “They may also increase their spending for holiday gifts while other affluent consumers are not.
“Net worth is a more important indicator of spending plans than is income,†he said.