According to New Survey, the Affluent Show a Degree of Cautious Optimism for Future Economic Conditions.

DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/c89495) has announced the addition of Spring 2008 Tracking Study of the Affluent Market - #13 to their offering.

This national survey included 467 men and women in households with an average annual income of $315,600, an average net worth of $3.1 million, average investable assets of $1.5 million, and an average primary residence value of $1.2 million. This is the 13th in a continuing series of twice-yearly surveys of the wealthiest 10% of U.S. households, based on net worth, as determined by Federal Reserve Board research.

In addition to providing an analysis of the data tracked in each survey, this report identifies which segments of the affluent market are reducing or deferring expenditures (and which are not) due to current economic conditions, why they are reducing their expenditures, and for what types of products and services spending is being cut back. The report also explores what types of mortgages, if any, exist on the primary residence, how much equity exists in the home's value, and how these factors may influence future spending plans.

Index values shown in this report can range from 0 (negative) to 200 (positive), with an index of 100 being a neutral reading.

Major Findings

Perhaps reflecting the stock market volatility and the turmoil in both the housing and credit markets in March, the index of 52 for current business conditions represented a sharp drop of 56 points from the Fall 2007 survey. This index is at its lowest level since Fall 2002, the historic low for this series of surveys. This index is consistent with the March Consumer Confidence Index of the Conference Board, which also declined sharply (down 12 points from the February survey) to its lowest level in five years.

The composite Affluent Consumer Expectations (ACE) 12-Month Economic Outlook Index of 102, while hovering near historic lows, still represents a modestly positive outlook overall, despite the negative index of 99 for future business conditions. The composite index essentially held even with the Fall 2007 survey due to modest increases in the indexes for business conditions and the stock market, the two other elements of the composite index.

Men are much more optimistic than women in their 12-month outlook for business conditions and the stock market while women are more optimistic in their outlook for household income. Historically, the degree of optimism, as indicated by the 12-Month Economic Outlook Index, generally strengthens as income, investable assets, and net worth increase. Such was not the case in this survey. A degree of cautious optimism for future economic conditions is exhibited across most of the demographic segments. Given their very negative opinion of current business conditions, the respondents may be indicating they do not feel economic conditions can become much worse and that they therefore expect to see some degree of improvement during the next 12 months.

Almost half (45%) of the affluent market indicates they have not and do not intend to reduce or defer expenditures. In fact, they report plans to increase spending during the next 12 months in 11 of the 17 categories of products and services. These respondents, who are generally rather positive in their outlook for economic conditions during the next 12 months, differ from the other respondents in a number of other ways. They are a bit more mature (average 55 vs. 52), twice as likely to have no mortgage on their primary residence (32% vs. 16%), more likely to have a fixed rate mortgage (78% vs. 69%), have 50% or more equity in their home (80% vs. 59%), have about a third more average income ($365K vs. $275K) and average net worth ($3.7M vs. $2.7M), and 90% more in average investable assets ($2.1M vs. $1.1M).

Among the 55% of the respondents that indicated a conscious past and/or future effort to reduce expenditures, there was an average of 3.6 reasons for these actions. The most frequently cited reasons were "increased cost of every day goods and services" mentioned by almost two-thirds and "possibility of recession" mentioned by over half of those responding. However, a number of reasons were also mentioned by 30-40% of the respondents: devaluation of investment portfolio, increased taxes, job/compensation uncertainty, stock market volatility, and increased insurance costs.

Those under 50 years of age were more concerned about uncertain job security/compensation. Those over 50 were more concerned about a decline in their investment portfolio, stock market volatility, and increased taxes and insurance costs. Declining home values were of greater concern to those in the lowest net worth group (under $1.5M).

The absence of plans for major expenditures in the next 12 months had been relatively unchanged (43-46%) since the Fall 2005 survey. Now more than half of the respondents have no plans to make any of the 8 major expenditures in the next 12 months. This is an historic high for this survey. Plans for motor vehicle acquisitions and building a new home as a primary residence are at historic lows. Major home remodeling has equaled its historic low. Plans to take a cruise are effectively at their historic lowest level. Plans to acquire a vacation residence (by building new or purchasing an existing home) have never been lower other than in the Fall 2005 survey.

Almost two-thirds of those with annual incomes under $200,000 have no plans to make any of the major purchases in the next 12 months.

Interestingly, plans to purchase an existing home as a primary residence increased slightly from the Fall 2007 survey. Purchases of an existing home as a primary residence are most likely by those under 50 years of age and/or those with $200K+ income. If the respondents are reflecting the view that the housing market is approaching a bottom, this could be a good advance indicator for improvements in the housing market and thus the economy as a whole.

Given the 11.2 million U.S. households that comprise the wealthiest 10%, it can be calculated that this market segment represents the potential for approximately 2.2 million motor vehicle acquisitions in the next 12 months; 2.4 million home remodeling projects; 1.6 million cruise buyers (for 3.2 million total cruisers); and the acquisition of 493,000 primary residences and 470,000 vacation residences. These estimates are all down from the Fall 2007 survey.

Those with the lowest levels of equity in their home are the least likely to have plans to purchase 1 of the 8 major items and are most likely to be expecting the largest reductions in their spending for most, but not all, of the 17 products and services.

For more information visit http://www.researchandmarkets.com/reports/c89495