U.S. Spending Surges Ahead While The Fed Starts "Talking About Talking About Tapering"
U.S. retail sales dropped more than expected in May while spending on services increased as Americans rushed back to sectors shunned during the pandemic. It is now estimated that more than 50% of eligible U.S. citizens have been vaccinated.
- In Europe, vaccination campaigns have gathered steam as around 17% of Europeans have been fully vaccinated while 30% of adults have received at least one dose
- Rapidly increasing vaccination rates and piles of excess savings are now being redirected into services and travel. According to BlackRock, around € 700B ($ 850B) are waiting to be deployed across Europe and the U.K.
“We call this ‘revenge spending’ – people are thrilled to be gaining a taste of freedom, and so splurge on social occasions and discretionary items” Nigel Bolton for BlackRock by Eliot Smith for CNBC
Analyst have pointed to the “Revenge Buying” phenomenon that led consumers to flock to stores once lockdowns and restrictive measures were lifted
“The Hermes store in Guangzhou, for instance, hauled in $2.7 million in sales the day it reopened in April —believed to be a record for a boutique in China.”
- Excess savings and the approach of the summer could lead consumers to direct their “revenge buying” on categories long shunned: alcohol, cosmetics and perfumes
- A leader in this space is LVMH, the holding company above Ruinart, Dom Perignon, Veuve Clicquot, Loewe, Rimowa, Fendi, Acqua di Parma, Bulgari, Hublot and many others
- Finally, rising interest rates might have a limited impact on luxury spending. The high profitability of LVMH (and fellow luxury groups) also considerably limit the impact of rising rates on the group’s bottom line
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