NEW YORK (Reuters) - 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 on 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)
Above is an article talking about the richer population in America having to cut down on luxury goods due to the fall in economy of America. Prices of oil gone up, and many people faced recession. To the richer population in America, this might not cause a big problem, but they still have to be careful in spending their money and demand less of luxury goods and services. Thus, the demand for luxury goods would fall and when demand falls, supply is most likely to fall too. Producers would produce less of these luxury goods during this period of time to save costs. Until the economy becomes better, the rich would go back to buying luxury goods and maybe buy even more then and demand would increase greatly, prices of the luxury goods would increase or producers might produce more of the luxury goods to increase revenue.