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HNWs see cost of basket of luxury Christmas goods rise by 7.2%, says Coutts

21 December 2017

Private bank’s festive research shows while luxury goods inflation has fallen to 3.6% from 6.2% as pound rises, the cost of Christmas has risen by more than twice CPI.

The latest edition of the Coutts Luxury Price Index (CLPI), which covers a basket of 132 luxury goods and services from across 12 categories, shows that whilst overall luxury inflation rate has fallen sharply in the last six months, from 6.2% in May to 3.6% in November, it still remains well above the UK Consumer Prices Index (CPI) which is currently 3.1%.

Coutts says the cost of luxury goods and services fell significantly over the last six months, largely due to the appreciated value of sterling over the same period, which muted price increases in the UK as the cost of imports dropped. This contrasts markedly to May when sterling slid and drove up the prices of luxury items.

In the 12 months to May this year, the pound fell by 7.3% against other major currencies largely due to the European Union referendum result.

Increased festive costs

By contrast, the research shows that a basket of 20 ‘festive’ goods, likely to be popular over the coming weeks and which includes classic diamond earrings, premium perfumes, high end mobile phones and luxury alcohol has risen to 7.2% – double the current CPI.

The research highlighted high-end mobile phones as one of the main drivers of the high inflation rate of the basket, with prices up 36% over the 12 months. Luxury alcohol is another key factor, with scarcity and rarity driving up costs by 31%, and premium tea prices are up 20%. Fine wines and whiskies also are a key driver in the festive basket, with champagne prices up about 16% year-on-year. This is created by increasing demand from investors and consumers alike for what is, by its nature, a limited commodity.

Sven Balzer, senior strategy manager at Coutts said: “This index brings into sharp focus the need for wealthy individuals to think carefully about how they can protect the purchasing power of their wealth. It shows that, although luxury inflation has fallen sharply in the last six months, it still remains well above the UK CPI.

“This sends a sharp message to high net worth individuals – inflation on luxury goods and services remains a material risk to their wealth as it continues to erode the spending power of their cash.

“People who spend extensively on luxury goods will experience different inflationary pressures than those represented by the CPI and it makes sense for them to think carefully about ways to protect the value of their money.”

 

Index methodology

The Luxury Price Index, published by Coutts private bank biannually, tracks £1.bn of client spending data across debit and credit cards, regular payments and cheques.

It tracks the price fluctuations of a basket of 132 luxury goods and services from across 12 categories, including food, alcohol, clothes, housing, household, health, transport, communication, recreation, education, restaurants and hotels and miscellaneous.

While it does not show the overall inflation rate faced by wealthy consumers, it reflects the luxury portion of their spending.

The latest edition measures luxury inflation over 12 months to November 2017.

 

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