In July 2024, U.S. luxury spending took a notable hit, dropping 11% compared to the same month last year, according to Citi Research. This decline reflects a continued downturn in luxury demand, which began to surface significantly at the start of the third quarter. Last month also marked a 7% decrease in spending, indicating a troubling trend in consumer behavior.

Analysis of credit card data from over 10 million users reveals that categories central to luxury shopping—specifically luxury leather goods and ready-to-wear clothing—were among the hardest hit. Sales in these areas fell dramatically by 19% and 15%, respectively. Jewelry also suffered, albeit slightly less, with a 6.5% drop in sales. Conversely, the luxury watch segment experienced unexpected growth, enjoying a 10% increase for the first time since early 2022.

Citi’s analysts attribute this downward shift partly to the economic landscape, which appears to be declining faster than anticipated, especially for lower-income consumers. These buyers are feeling the weight of inflation as their excess savings diminish. Notably, the market’s entry-level category, often aimed at aspirational buyers, has faced increasing pressure from significant price hikes over recent years, compelling many to rethink their spending habits.

As industry leaders evaluate these trends, it raises crucial questions about whether current market struggles are transient or signal a lasting transformation in luxury consumer behavior.