The lifestyles of the rich may be set for a downgrade as the U.S. economic malaise works its way up the income ladder, according to a survey released Wednesday.
The sharp slide in confidence among lower-income households has come as no surprise in recent months as average consumers confronted the debilitating effects of a housing slump, record oil prices and a contracting job market.
Upper-income households have also proved susceptible to the slump even though their hardships are more likely to involve fewer purchases of expensive watches and designer clothes, rather than cutting back on the bare necessities.
A survey of the “affluent population” in the May edition of Spectrem Group’s High Net Worth Advisor Insights newsletter showed 64 percent of respondents planned to cut back on luxury item purchases.
“Cutting luxury items is a logical step in a recession, and not very surprising,” the newsletter said. “The key will be watching for the next level of personal budget cuts.”
Spectrem surveyed 250 affluent U.S. households, defined as having $500,000 or more in investable assets, in late April.
The survey also found that 65 percent of the respondents said they would keep their car for a longer period of time, 38 percent planned to cut back on travel and 36 percent said they would change from international to domestic trips.
In a sign of the times, which have been marked by soaring energy costs, 47 percent said they would consider a new or used car with better fuel efficiency.
“Considering that filling up a high-end SUV can cost upwards of $80 these days, this might have become more of liability in the affluent household,” the newsletter added.
The survey comes as oil prices vaulted over $130 a barrel on Wednesday, stoking fears of stagflation as crude showed no signs of ending its relentless run to record peaks.
Meanwhile, consumer sentiment broadly has fallen to 28-year lows, as measured by the latest Reuters/University of Michigan sentiment index released on Friday.
(Reporting by Burton Frierson; editing by Jonathan Oatis)
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