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This increasingly conservative spending behaviour offers a contrast to China’s improved economic performance. In November, the IMF projected the country’s economic growth to rise from 5 per cent to 5.4 per cent, in line with the strengthening Chinese yuan. While growth has remained consistent with the government’s 2023 targets, macroeconomic challenges like restrained export demands and housing market weaknesses are contributing to a 2024 forecast of slower GDP growth. And, despite upgraded economic projections, 49 per cent of consumers surveyed by Vogue Business continue to express concerns about the economy.
Nonetheless, middle-tier spend should see a recovery in Q1, thanks to the Lunar New Year on 10 February, with lower-tier spending projected to decrease by 14 percentage points, 9 per cent of which are due to shift to the middle tier. Based on these forecasts, Q1’s middle-tier spending is estimated to surpass its peak in Q2 2023, jumping from 35 per cent to 40 per cent. Meanwhile, projected higher-tier spending is set to remain at its peak but with slower growth.
This data pulls into focus the post-lockdown spend rebound of Q2. While declines in Q3 and the latest quarter — almost a year on from the relaxation of Covid measures — signal an unsettling contrast for luxury brands, current spending trends may be influenced not only by macroeconomic factors, but a normalisation of spend.
Jewellery sparkle dims for China’s top spenders
The downward trend of Q3 continues into Q4, showing a further reduction of overall spend at top luxury brands. Despite this, Chanel continues its reign as the most-shopped brand in Q4. Burberry rises three positions to become the 11th most-purchased brand — one of few brands to witness a rise from Q3 to Q4, alongside Louis Vuitton, which overtook Saint Laurent and Gucci to attain third place. This brand repositioning reflects the mixed nature of Q3 financial results released by luxury conglomerates LVMH and Kering.
Both Burberry and Louis Vuitton are benefiting from new creative directors, with Daniel Lee and Pharrell Williams both proving successful in the Chinese market. Burberry’s rebrand, which hones in on its British heritage, has seen purchases among younger consumers (under 35s) rise at a faster rate than their older counterparts (over 35s) in 2023. The maison also released a Lunar New Year collection that pays homage to Chinese culture.
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