NEW YORK — Luxury firms have been on a roll, enjoying robust sales as consumers remain hungry for pricey merchandise. But for at least one economist, this is as good as it gets.
Carl Steidtmann, chief economist of Deloitte Research, said Wednesday, “It’s been awfully good for these luxury firms. So good that it would be hard to imagine it getting better. The luxury retailers have had a terrific run, which is typical of an economic recovery.”
He said tax cuts affecting higher-income households, such as dividend income from equity holdings, and strong growth in home prices have contributed to the recovery. Those same factors, however, also are contributing to a slight softening of the economy, which could cool the hot luxury market.
“Home prices have started to weaken and the benefits from the effects of a tax reduction are beginning to pass. The economy is beginning to flatten out and spread out. You’ll see luxury goods retailers doing OK, but not necessarily better than what they’ve been doing in terms of growth,” the economist said.
Steidtmann predicts overall retail growth for the balance of 2005 to be between 6.5 and 7 percent. That rate of growth, Steidtmann acknowledged, is still pretty good, but slower than the 8.3 percent rate of growth for retail in general over the last six months.
Steidtmann expects the job market to stay fairly strong, with a pickup in employment growth of between 200,000 to 250,000 jobs created every month. That at least should keep a certain amount of cash flowing into the household sector.
And, with the stock market expected to continue rising, merger and acquisition activity is going to continue, the economist said.
“A rising stock market creates an expectation for businesses that stock prices will rise. One reason for buying now is the anticipation of rising value of that equity, and the idea that one can get a better deal today than tomorrow,” he explained.
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