Sales growth in the global luxury market will slow sharply this year, as Chinese and European customers rein in spending and concerns about the global economy take their toll, a study predicted on Monday.
The report from consultancy Bain & Co. and Italian luxury goods trade body Altagamma, closely watched by many in the industry for its authoritative predictions, said growth in Europe would slump to 5 per cent this year, approximately half of last year's rate, measured at constant exchange rates.
Worldwide, luxury goods sales will grow by 7 per cent in the final three months of 2012, to bring growth for the full year to 10 per cent -- the third consecutive year of double-digit growth since the recession.
Bain & Co. said the first signs of a deceleration began to appear earlier this year in China, the luxury industry's main engine of growth. A planned change of government in China, as well as measures to contain inflation, had curbed luxury spending by Chinese consumers, the report said.
"The slowdown in China will likely continue in the first quarter of 2013 until the transition to a new government is completed," Claudia D'Arpizio, a Bain partner in Milan and lead author of the study, told reporters.
Its findings of a slowdown chime with comments from some companies, such as Burberry Plc, which has warned of a slowdown in demand in China, though others such as Prada SpA have dismissed talk of a sharp slowdown in spending on luxury goods.
The report said the Chinese luxury goods market is set to rise by 8 per cent at constant currencies this year to reach €15-billion ($19-billion), while last year it had expanded 30 per cent. The Americas region is projected to post strong gains in 2012, with revenue rising 13 per cent by year's end.
Chinese consumers, many of whom shop abroad, have become the world's No. 1 buyers of luxury goods, ahead of the Japanese, the Americans and the Europeans, the study found.
Chinese consumers make up half of luxury purchasers in Asia and nearly a third of those in Europe.
Tourists overall represent 40 per cent of total luxury sales, and in some countries, such as France, they make up 60 per cent. The country has become the No.1 destination for Chinese tourists in Europe ahead of Italy and Britain after simpler visa rules were introduced.
Europe has been hit by the euro-zone debt crisis and luxury sales growth will approximately halve in 2012 from last year to 5 per cent, with Italy and Spain suffering the biggest slumps, the report said.
Germany is however emerging as the fastest-growing luxury hub in Europe, as it represents a point of entry into the continent.
Bain estimates the luxury goods market will grow at constant exchange rates by between 4 per cent and 6 per cent a year between 2013 and 2015, bringing the market to more than €250-billion.
The report predicts global sales growth in the luxury market will slow this year to 10 per cent from 11 per cent in 2011 at current exchange rates, but forecasts a strong fourth quarter.
"A weaker euro may be positive for companies' earnings but it raises an alarm on real consumption trends," Ms. D'Arpizio said.
Altagamma expects European demand to grow 4.5 per cent in 2013, with signs of improvement emerging in the second half of the year.
Foreign tourism shopping in Europe generates around €30-billion of annual sales but its growth is expected to slow to 18 per cent in 2013 from 28 per cent this year, according to a report by tax free service provider Global Blue.
"Concerns about market weakness are somewhat overblown," said Ms. D'Arpizio. "But we are seeing sharp disparities between brands that are not keeping up with the quickening pace of change in the market and those that are adjusting to shifts in tastes and demographics."
More details about the state of the global luxury sector will be published later on Monday when LVMH Moët Hennessy Louis Vuitton SA, the world's biggest luxury group and owner of brands Louis Vuitton, Celine and Kenzo, releases its third-quarter sales figures after market close.