Economic Outlook: The Affluent Are “Neutral”

What does it take to crack the wealthiest 10% of Americans in 2005? $100K a year? No way, slacker, maybe you can park the top 10%’s cars. According to the American Affluence Research Center — the name tells you they don’t mess around with the riffraff — the wealthiest 10% of U.S. households (as defined by net worth) have an average annual income of $270,000, with an average net worth of nearly $3 million. They earn 40% of all the income earned by all American households, and these 11 million households hold 85% of the value of all publicly traded stock and stock mutual funds in the U.S.

So what’s up with the 10 percenters? How are they weathering these uncertain times? In the spring and fall of each year, the AARC conducts surveys among the 10 percenters to measure their levels of confidence in the economy and to obtain a preview of how their spending, saving, and investment patterns will change in the coming months. The AARC’s latest Affluent Market Tracking study reveals that the affluent are far less positive than they were six months ago, continuing a decline that began in spring 2004.

The composite Affluent Consumer Expectations (ACE) index for economic conditions 12 months from now had set a record low this past spring at 116 and has now dropped further to the “neutral” level of 100.

The affluent also indicated modest declines in their plans for major purchases over the next 12 months for 17 categories of goods and services, including major appliances, home computers, furniture/furnishings, entertainment equipment, casual and upscale dining out, entertainment, recreation, domestic and international travel, designer and non-designer apparel, collectibles, fine jewelry, and political and charitable contributions.

Interestingly, of the 17 categories of products and services tracked for future spending plans, charitable contributions, political contributions and home computer equipment are the only categories to show improvement from the last survey – you can write all that stuff off, right?. The Future Spending Index average (91.8) is at its lowest level since tracking began in fall of 2003.

Their projected $57 billion in expenditures for December holiday gifts (25% of the estimated total holiday gift market) is 1.6% below 2004 spending levels. This contrasts with a 5% increase projected in an early October survey of the total adult population for the National Retail Federation – hmm, the lower 90% plan to splurge a little.

The survey was conducted in September and may reflect heightened concerns about the possible negative economic consequences of severe hurricanes Katrina and Rita, concerns which may already be somewhat abating. In other words, the affluent may be a bit jollier than they appeared in this survey.