China’s property downturn previously reduced household wealth. Wealthy investors then moved more money into shares and other financial assets. That shift left their spending decisions more exposed to stock market movements.
“We observe some correlation between the capital market performance and luxury sales in the last two years,” said Robert Wu, chief executive of Shanghai research company Baiguan. “In the past, such correlation was less obvious because a lot of wealth was stored in real estate.”
Shanghai financial product salesperson Stella Lin said losses in her stock portfolio stopped her recent luxury purchases. account for more than half of her invested capital. She previously spent at least $15,000 each year on designer clothing and handbags.
“I’m already in a money-losing mood,” Lin said. “I haven’t felt like shopping in any fancy stores in the past two months.”
China’s wider retail sector also showed weaker demand. Retail sales grew only 0.6% last month, while sales of jewelry, cars and other expensive products fell more than 10%.
Luxury companies will now monitor spending during Chinese Valentine’s Day, traditionally a strong sales period. Roizen said failure to record growth during the event would provide further evidence of a broader market slowdown.