Luxury goods revenues remained flat in the second quarter of 2024, marking the slowest growth in 15 quarters, according to a recent report by Bank of America.
"Demand deteriorated in July, driven by Chinese consumers and the rest of Asia," said BofA.
The bank's analysts noted that luxury demand further deteriorated in July, driven by a significant drop in spending by Chinese consumers.
While luxury spending in China grew by 4% year-over-year in 2Q, this was down from a 10% increase in the first quarter. The report highlights that this decline is partly due to "weak consumer sentiment" and a shift from onshore to offshore luxury consumption.
The rest of Asia also experienced mixed results, with Japan remaining the strongest market, although it too saw a year-over-year slowdown in July.
Meanwhile, the bank stated that luxury spending in Korea weakened, and trends in Hong Kong and Macau were similar to those seen in the second quarter.
"European tourism was also weak," adds BofA. "Whilst European and American local demand improved slightly, it was not enough to compensate for weakness elsewhere."
According to the bank, tourism spending in Europe dropped by 1% year-over-year in July, compared to an 8% increase in the second quarter. France was particularly affected due to disruptions related to the Olympics, leading to a worsening of tourism spending compared to 2019 levels.
Local demand in Europe and the United States showed slight improvements, with American luxury spending, although still negative, improving marginally in July, while monthly retail sales in the UK and France accelerated compared to the second quarter.
As analysts pointed out, the easier year-over-year comparisons in August will be a crucial test for luxury demand in the second half of 2024.