Investing.com --China's tentative luxury spending recovery appears to be losing momentum again, with early third-quarter data showing a sharp slowdown that raises the risk of another "false dawn" for the sector, Bernstein analysts said.
Luxury shopping mall sales data from mainland China showed spending weakened sharply in June and July across price points and categories, culminating in a 12% year-over-year decline in July. That follows broadly flat growth in the first quarter and low-single-digit growth in the second.
The latest slowdown interrupts a gradual revival over the previous four quarters. Chinese consumer confidence remains depressed following its post-pandemic decline, with weaker economic growth weighing on middle-class shoppers after luxury brands implemented substantial price increases during the post-Covid spending surge.
Previous signs of recovery at the end of 2023, 2024 and 2025 also faded. Hopes that government stimulus would revive confidence and spending were eventually overwhelmed by falling property prices and persistent deflation.
New tax measures may be adding to the pressure. Greater scrutiny of offshore Chinese wealth and the prospect of tougher tax enforcement appear to be curbing spending among high-net-worth individuals. This segment had remained comparatively resilient despite weakness among middle-class consumers.
The weaker trends prompted a 110-basis-point cut to the third-quarter industry organic growth forecast to 4.9%, down from 6.3% growth in the second quarter. The full-year 2026 estimate was trimmed by 40 basis points to 5.1%, compared with 0.5% growth in 2025.
Performance is also diverging sharply between brands. Zegna, Gucci and Richemont's Jewellery Maisons have shown relative strength, while LVMH has been weaker.
Richemont remains the preferred luxury name, supported by resilient jewellery demand and stronger hard-luxury growth. Gucci's 20% to 30% price cuts could support Kering's near-term performance, though they risk weakening brand equity over time.
LVMH may need product-mix changes at Louis Vuitton to reconnect with middle-class shoppers, leaving the sector increasingly reliant on company-specific turnarounds rather than a broad Chinese demand recovery.
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