Luxury goods: The lapse of luxury

Producers of luxury goods are suffering in the downturn

COULD those who produce luxury goods escape the worst of the global economic slump? Not likely. Some had dared to hope so, suggesting that rich consumers may be insulated from the financial turmoil that has engulfed those less well off, or that shoppers’ discretionary spending may go to acquiring fewer, better quality items. In fact practice suggests that the optimists have got it mostly wrong.

Revenue in the luxury-goods industry may fall by 3-7% this year according to Bain, a consulting firm. That could prove to be a conservative estimate, as the economic slowdown begins in earnest. Bad news is pouring in. Diamonds, a byword for luxury, are not forever. On Monday February 23rd De Beers, the leading diamond producer, admitted that operations have been suspended at Debswana, a joint venture with Botswana’s government that is the world’s biggest diamond producer. Other diamond miners are taking similar measures. Americans, who buy half the world’s diamonds, are resisting the lure of the sparkle, apparently foregoing fancy engagement rings for now. ...

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[Source: The Economist: News analysis