China posted some of its weakest economic figures in decades last month. The country grew at its slowest pace last year since 1990 (a still-respectable 6.6%), and is forecast to grow at an even slower rate of 6.3% in 2019. But one group of consumers doesn’t seem to be feeling the pinch: the country’s growing class of millionaires and billionaires.
On average, two new people in China become billionaires each week, according to calculations by UBS and PricewaterhouseCoopers. These super-wealthy individuals are among the consumers driving a slew of strong earnings releases this year for luxury goods makers.
French multinational Hermès today posted a roughly 10% bump in overall fourth-quarter sales, resulting in record annual sales of almost €6 billion (approximately $6.7 billion). Leather goods like its trademark Birkin bag, which retails from $10,000, drove the increase. The company specifically saw a 14% growth in its China and South Asia sales, when adjusting for currency fluctuations.
Handbag sales also resulted in French multinational LVMH, which includes brands like Louis Vuitton, Givenchy, and Marc Jacobs, having a good year. Its 2018 sales exceeded €10 billion ($11.3 billion), a nearly 20% climb from the previous year. Sales growth in Asia was particularly strong, and beat other regions (paywall).
Meanwhile, purchases of mid- to high-end products appear to be slowing. Apple last month blamed weak sales in China for a downgrade in its fourth-quarter sales forecast.
For now, Chinese consumers of luxury goods appear unfazed by the US-China trade war and global economic slowdown. The industry has shown to be durable in the country, growing even in the wake of the global financial crisis. It now accounts for a third of the worldwide luxury market and will reach nearly half by 2025.
A November poll of wealthy Chinese consumers by Agility Research found that half of respondents planned to spend more on luxury goods this year.
Some super high-end brands are doing well despite the global slowdown outside of China as well. British luxury carmaker Rolls-Royce recently posted its best annual sales in its 115-year history—albeit boosted by US president Donald Trump’s tax cuts. Rolls-Royce vehicles start at $250,000, and can fetch seven figures.