Spending Plans Stabilizing as Expectations for Business Conditions and Stock Market Rise

This new study, the fourteenth in a series of twice yearly tracking surveys by The American Affluence Research Center, indicates the affluent may feel the economy is bottoming out and that they are upbeat about improvements in business conditions and the stock market during the next 12 months.

The composite Affluent Consumer Expectations (ACE) 12-Month Economic Outlook Index of 113 rose 11 points from the Spring survey and represents a relatively positive outlook overall. Substantial increases in the indexes for future business conditions (up 24 points to 123) and the stock market (up 19 points to 124) offset a decline in the expectations for personal household income (down 10 points to 93), the third element of the composite index. Index values can range from 0 (totally negative) to 200 (totally positive), with an index of 100 being a neutral reading.

Highlights of this national survey of 552 affluent men and women can be found at www.affluenceresearch.org The survey participants have an average income of $304,000, an average net worth of $3.1 million, and average investable assets of $1.6 million.

The index of 47 for current business conditions represents only a modest drop of 5 points from the Spring 2008 survey, which had a precipitous drop of 56 points from the Fall 2007 survey. This index is at its lowest level since the Fall 2002 survey and essentially indicates the view of the affluent that the economy has effectively been in a recession for several months, as first noted in the Spring 2008 survey.

Over half (54%) of the respondents have no plans to make any of 8 major expenditures in the next 12 months. This is essentially unchanged from the historic high recorded in the Spring survey (53%). Plans to acquire a new primary residence were up slightly for both buying (3.4%) and building (1.5%). Plans for motor vehicle acquisitions (20%) and plans to cruise (14%) were unchanged from the historic lows of the Spring survey.

Of the 17 categories of products and services, for which expected changes in spending during the next 12 months are tracked, the indexes for 9 categories were up, 7 were down, and 1 was unchanged. In all 17 categories, at least two-thirds said they would spend the same or more as they did during the prior 12 months.

This survey also included a series of questions that reveal how the affluent define “luxury” by price points and brands for 37 different products and services. This ground breaking research demonstrates the ambiguity of the word “luxury” among the affluent and their apparently limited familiarity with the brands normally associated with luxury.

The results of this research demonstrate that surveys that attempt to measure spending on “luxury” items are useless, at best, and dangerously misleading, at worst, if “luxury” is not precisely defined by specific price points. The same appears to be true for surveys that attempt to identify “luxury” brands without specifying price points to define “luxury”.

Unlike other affluent and luxury market research that is based on surveying online panels of people who are compensated for participating in regular and frequent surveys, our unique study is based on samples drawn at random from, and representative of, the 11.2 million households that account for the wealthiest 10% of US households based on net worth, according to the latest Federal Reserve Board research.

The 38 page, 33 table report can be purchased for $395 (or $595 with the full set of 302 pages of data cross tabulations).

AARC provides marketing research, mailing lists, and consulting services to businesses that focus on the affluent. For more information: Ron Kurtz at KurtzGroup@comcast.net or 770-740-2200.