The sale of luxury goods may fall this year as consumers tire of higher prices. Men's Wearhouse and Jos. A Bank are talking….after months of a stormy takeover process. Factory activity improved in February and consumer spending rose in January. The problem is that the spending was primarily of heat due to the harsh winter. And GM sales were down while Chrysler reported a strong February.
Luxury goods sales slow
The Wall Street Journal is reporting that spending on luxury apparel reached $390 billion in 2013 based on a study from Boston Consulting Group. Growth is starting to slow, however, from the pre-Recession pace. Sales of luxury apparel, leather goods, watches, jewelry and cosmetics rose 7 percent last year, down from the 11 percent annual rate in 2010. BCG predicts that sales growth will hover around 6 percent for the next few years. Higher prices have been allegedly masking lower growth in volume. What do the higher prices mean? The price of a Chanel quilted handbag has increased 70 percent in the last five years to $4,900. Cartier’s Trinity gold bracelet now sells for $16,300, up 48 percent from 2009.
Consumer spending up…but due to energy costs
Americans spent more in January, according to the Associated Press, but unfortunately, that spending was due to heating bills from the harsh winter. Spending in areas such as autos and clothing declined in January, after a 0.1 percent increase in December. Overall spending rose 0.4 percent in January, after a 0.1 percent gain in December, as reported by the Commerce Department. The overall spending increase in January reflected a 0.8 percent increase in spending on services, the effect of higher heating bills. Consumer spending is closely watched because it drives 70 percent of economic activity. On Friday, the government said that the economy grew at a 2.4 percent rate in the fourth quarter, down sharply from an estimated rate of 3.2 percent.
Factory activity growth strong
US manufacturing activity accelerated in February, rising to its highest level since May 2010. CNBC reports that financial data market firm, Markit, has said the final read of its US Manufacturing Purchasing Managers Index, otherwise known as the PMI, rose to 57.1 in February, above the preliminary reading of 56.7 and the expectations of 56.6. The January reading was much lower at 53.7. Readings above 50 indicate that an economy is expanding. The new orders component rose to 59.6 and output rose to 57.8.
Men’s Wearhouse and Jos. A Bank are talking
The Associated Press is reporting that Men’s Wearhouse and Jos. A Bank Clothiers Inc. are moving closer to a merger, announcing that they are exchanging confidential information with one another. Men’s Wearhouse also indicated they had received a draft merger agreement from Jos. A Bank. The news comes four days after Jos. A Bank rejected the latest acquisition bid of $1.78 billion from Men’s Wearhouse. The former bid was at $63.50 per share, however, Men’s Wearhouse indicated that it might be willing to raise its bid to $65.00 per share if Jos A Bank dropped its acquisition of Eddie Bauer.
GM sales down, Chrysler up
GM reported that it sold 221,104 new vehicles in February, down 1 percent from a year ago. Buick did the best, but Cadillac was down 2.9 percent. Sales of the new full-size pickups, specifically the Silverado, tumbled 12.1 percent. USA Today reports that Chrysler had a great February, up 11 percent from February 2013. While sales of cars were down 15 percent, trucks were up 27 percent. The Jeep brand posted a 47 percent increase and was the largest of any Chrysler Group brand during the month. Ram pickup, which was just newly updated, was up 26 percent.
Catherine S. McBreen is President of Millionaire Corner. McBreen plans and develops content for Millionaire Corner. Catherine balances editorial content to meet the informational needs of both new and seasoned investors. She designs special monthly surveys on topical issues affecting the economic environment.
McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law. She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.
Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences. She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth. Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.
McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)
Catherine is the mother of four and is involved in many school and community events.