Luxury slows down the weak question, the low power: Morgan Stanley

The luxury goods industry, which has historically grown at an average annual rate of about 7 %, this year is facing a more adverse perspective between macroeconomic challenges and limits of increasing prices.The industry has experienced a post-pandemic boom, powered by savings during the Covid-19 blocks, the tax stimulus in the United States and a wave of new recruits to luxury brands. Sales of the best names increased by over 80 % between 2019 and 2024, according to a recent survey by Morgan Stanley Alphawise.

Now the current background is obscured by uncertainties such as the adverse demand of the main consumption nationalities – Chinese, American and European – which represent 75 % of the spending in the sector; The normalization of growth within the luxury industry, which could face a post-pandemic effort; the impact of US rates; high interest rates in western countries; and General expectations of slower global growth.

The luxury goods sector is facing a slowdown in 2025 due to the weakest demand by China, the United States and Europe, its most important consumption bases – Amid economic uncertainty, high interest rates and limited power power. The Chinese question will remain flat and while the US rates involve a minimum impact, wider risks such as the recession and the decline in consumers’ feeling are more serious concerns, Morgan Stanley observed.

“Today we are in a very different environment. The power of luxury prices has eroded after significant increases in post-apandemic prices and this year the Chinese demand will remain flat,” he said Edouard Aubin, head of the search for European luxury brands by Morgan Stanley. “The vision of consent is that the industry is unable to transmit significant increases in prices.”

Chinese consumers have become the major expenditure all over the world for personal luxury goods, representing about 30 % of the total, compared to about 22 % for US consumers. The prospects for shopping in China are at the lowest level from the Covid-19 pandemic, according to the survey.

The investigation, conducted at the beginning of April between 2,034 Chinese consumers, indicated that the announcement of the US rates on China has increased the concerns of families for jobs, salaries and investment losses, with 60 % of respondents who claim to predict expenditure in the next six months.

“The pickup in the expenditure of US consumers scheduled for 2025 is not likely to be as significant as initially expected,” added Aubin.

Many investors initially expected that the expense would recover strongly in 2025 after being weak for most of 2024. The April data showed a temporary improvement, credited to seasonality, a repressed question with a pull-pearcola expenditure probably

The impact of US rates should be less material for luxury goods companies, in particular those capable of applying small price increases in the United States to mitigate the impact.

In addition, many luxury companies have sent spring/summer collections in view of the implementation of the new American commercial policy, thus dodging a part of the tariff success this year.

“Overall, for luxury, we don’t think that the tariff impact will be so significant,” explained Aubin. “The greatest threats for luxury companies are the risk of a recession and the negative impact of the market moves to the feeling of consumers and on the net wealth of the country”.

For now, Aubin sees the submissive question in the next 6-12 months. “If the S&P 500 continues on its trajectory upwards and translate into a further creation of the wealth of families or if the Chinese real estate market stabilized or established itself, the industry could start recovering,” he said.

Fiber2fashion News Desk (RR)