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It seemed like an uncontroversial assertion: China’s recovery from the pandemic has been an economic disappointment, I said. Neither domestic consumption nor exports had rebounded nearly as strongly as expected. The two distinguished economists I was speaking to, as part of a panel at the FT’s Business of Luxury Summit in Monaco this week, agreed. A weak real estate sector; a debt overhang at local government level; cautious consumers. By now, a familiar story for China-watchers.
The summit’s audience had other ideas. When the Q&A began, the first questioner told us flatly that we were wrong about China. He was an investor in the Chinese luxury sector, and all his companies — including in real estate — were reporting best-ever results.
His comment echoes the mood of the conference attendees. The luxury industry is humming worldwide. Look at the latest results from the biggest name in the industry, LVMH. In the past year, as worries about an incipient recession have grown, the stock has left not only global indices, but even index-leading tech giants such as Apple in its dust. Revenue growth in the first quarter? Seventeen per cent. In Asia, excluding Japan, the figure was 36 per cent. We’re in a luxury boom. Share performance and revenue growth in the ultra high-end luxury brand Hermès have been even better.
In many parts of the world, tight labour markets and generous pandemic stimulus have helped wage growth for lower-income workers keep pace with inflation, and in some industries surpass it. The balance sheets of the middle class have improved as well. Good.
But if working stiffs have come out OK, the richest have consolidated their gains. Consider the US, for example. Between the end of 2019 and the end of 2022, the modest share of national wealth held by the bottom 50 per cent grew from 1.9 per cent to 3 per cent. Welcome news — and no skin off the noses of the top 1 per cent, whose share rose from 30.4 to 31.1 per cent, at the expense of everyone else at the top half of the distribution.
You can hardly blame investors for placing their bets on LVMH and other luxury houses. The incomes, wealth and spending power of the richest create the prospect of stable results through the cycle. (This is not to say that luxury firms are recession-proof. Several years ago I…
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