Wealthy still not asking the price

By Martinne Geller

NEW YORK (Reuters) - The stock market is swinging like a pendulum and the credit market is getting tighter than a drum but there are no signs the rich are buckling their Pradas to hold onto their bucks.

"Luxury goods still have quite a lot of momentum," said Kamalesh Rao, director of industry research at SpendingPulse, the retail data service of MasterCard Advisors.

Rao said luxury goods sales rose 10.7 percent in July from a year ago and added, "I'd be surprised if that changed radically in August."

SpendingPulse tracks sales in the MasterCard payments network and estimates sales for other types of payment.

Rao estimated that luxury goods sales in August would rise a vibrant 8 percent or 9 percent compared to apparel sales overall, which rose about 2 percent in July.

Coach Inc, which makes high-end leather goods, can attest to this.

"Coach's business continues very strong in all channels among the more value-oriented consumer and the premium consumer," Coach's Chief Executive Lew Frankfort said in an interview.

And Coach is not alone.

"No one is reporting any downturn," said Milton Pedraza, chief executive of research firm The Luxury Institute.

He said credit market problems were not enough to stop the rich from shelling out cash. But, a dramatic drop in their stock portfolios could change that.

The institute says that 87 percent of people with an average net worth of $3 million and average income of $288,000 have said a 10 percent or more drop in their stock holdings would trigger a cutback on luxuries.

Nearly half (46 percent) said it would take a decline of 10 percent to 19 percent, and 27 percent said they could stomach a decline of 20 percent to 29 percent before they started cutting back on indulgences. Hotels, autos, jewelry and electronics would be among the first to feel the pinch.

The Dow Jones Industrial Average and the Standard & Poor's 500 Index have both fallen more than 7 percent in the last month, though they were up more than 1 percent on Friday afternoon after the U.S. Federal Reserve cut the discount rate, charged on direct Fed loans to banks, as the mortgage crisis widened.

"Young, wealthy consumers with a lot of income but no net worth (would) pull back, no question," Pedraza said. "They would begin to prioritize: Do I really need to buy the 500 version of the BMW? Maybe I better pull back to the 300 series.'"

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