Despite a crackdown on graft in China, Russia’s conflict with the West over Ukraine and Europe’s sick-man economy, global luxury spending is still on track to rise 5% in 2014, according to a report released on Tuesday by consulting firm Bain & Co.
Bain, whose projections are closely watched by the luxury industry, also stuck to its forecast that global luxury goods sales will rise between 4% and 6% a year between 2014 and 2017.
So with all the insanity going on in the world right now, what is giving luxury a much needed boost? The good ol’ U.S. of A., which has become a bigger destination for rich Chinese travelers (now that getting a visa is easier), and where millennials are developing a taste for luxury as they progress in their careers and start to make more money, said Claudia D’Arpizio, a Bain partner in Milan and leader of the firm’s Global Luxury Goods and Fashion Practice.
“The U.S. is becoming a more and more important tourist destination for Chinese travelers,” D’Arpizio told Fortune. Chinese nationals spend three times more on luxury abroad than they do at home.
Indeed, Nordstrom (JWN), Neiman Marcus and Saks Fifth Avenue are all opening new Manhattan stores in the coming years to tap luxury’s ongoing explosion in the U.S., fueled by tourism.
U.S. consumer confidence hit 14 month highs in September, and high end shopping has been on a tear this year. The stock market has fallen sharply in the last week, casting a shadow on consumer spending, but the downturn would need to last for a while to hit luxury, D’Arpizio said. “We see consumer confidence that is the most important driver.”
The uptick in the U.S. comes at an opportune time for global luxury companies. In July, French luxury group LVMH reported disappointing first-half results for 2012 while rival Kering, whose brands include Gucci, spoke of an “unsettled business environment.” Meanwhile, L’Oreal said the U.S. rebound would help its second-half results.
Bain, which conducted the study with Italian luxury industry group Altagamma, said the global luxury market is on target to reach 223 billion € ($283 bilion) in 2014, which represents a 5% bump this year, a slower rate than the 7% last year.
And there undoubtedly clouds in the luxury sky: Chinese sales have been hurt by a crackdown by the government against corruption and conspicuous consumption. And Russian luxury sales are down hurt by a drop in tourism to Eastern European countries.