With the economy regaining its stride again, this holiday season could mark the reappearance of names like Gucci and Cartier under the Christmas tree.
High-end merchants from Tiffany in New York to Cruiser Yachts in Wisconsin, which builds million dollar powerboats as long as 54 feet, report a big surge in interest and purchases.
Many experts attribute the turn to luxury to a change in the national mood. People with some extra money, they say, are no longer afraid of spending it for fear that the economy will crash in the future.
Much of the shift is the result of the stock market's improvement - the Dow Jones Industrial Average has crested recently and remains above 10,000.
At the same time, the jobs picture seems to be improving, which also helps boost consumer confidence. And, some sectors, such as Wall Street, are expected to give out significant bonuses. Many executives are already spending some of that
money on goods they have coveted for the last two lean years.
"People feel they have permission to spend again," says John Baird, spokesman of Blue Nile Inc., a Seattle-based company that sells high-end jewelry on the Internet.
The boon for higher wage earners is important to the US economy. Americans whose total income falls in the top half among US households account for more than two-thirds of all spending. The upper-middle class buys everything from jewelry to expensive cars to spa bathtubs and chairs that give massages.
"If the upper half is doing well and spending then that is a powerful impetus for broader economic growth," says Mark Zandi, an economist with the Internet site Economy.com.
However, the spending boom is not extending to the middle- or lower-income classes, as is reflected in much more modest sales gains at Wal-Mart, the giant discounter.
This is in part because lower-income households have less money invested in the stock market and have not seen wage gains. A record number of bankruptcies show their pocketbooks are suffering.
But purchases by higher income wage earners are helping the economy, including blue-collar workers. For example, Cruiser Yachts, with factories in Wisconsin and North Carolina, has seen its sales grow 16 percent this season. The improvement gave the powerboat manufacturer confidence to build a new 50-foot boat, priced at about $800,000. It comes equipped with air conditioning, dishwashers, and flat-screen television sets.
The new boat, combined with the better sales, means the company of 750 employees is now hiring. "It's not big numbers but we are adding people," says Don DePouw, vice president of marketing. "In Oconto, Wis., population, 5,000, we're the largest employer with a labor force of 500."
Part of the improvement is a turn around in confidence as well as an improvement in how much money consumers have at their disposal. Tuesday the government reported consumer income rose a healthy 0.5 percent in Nov. after a smaller 0.3 percent rise in October.
The University of Michigan also reported its final consumer sentiment number, raising its estimate of consumer optimism from earlier in the month.
"Confidence is still fragile but it has improved measurably," says Mr. Zandi. "It's high enough to ensure that consumers will be out spending."
Consider Robert Zdancewitz of King of Prussia, Pa. With his own computer business looking bright, Mr. Zdancewitz decided to splurge on a diamond ring for his wife that cost well over $10,000. "Work has been good, this is a timely purchase," he says.
He purchased the ring from Blue Nile, which says its sales of such high-end purchases are up about 60 percent so far this year. Over the past four weeks, the company has sold rings that cost $169,000 and $144,000, respectively. "Two women purchased earrings that cost $60,000 and we joked they now had $30,000 on each ear," says Mr. Baird.
The purchases translate into more jobs. Blue Nile has seen its employment grow 50 percent in the past 18 months. "We're still trying to find jewelers to keep up with demand," says Baird.
Some merchants point to the better stock market as a key catalyst for the growing coffers of their businesses. Over the past year, the stock market has gained about $3 trillion in value. In addition, the Dow Jones average is up more than 20 percent for the year, which indicates a strong recovery in the financial-services industry.
The fattening wallets of Wall Street's warriors is reflected in the Fifth Avenue showrooms of Doris Leslie Blau, an antique carpet and tapestry merchant. Over the past year, business is up 40 to 50 percent, says president Nader Bolour.
As two workers unroll a late 19th century Indian carpet, Mr. Bolour explains that the item's look of Old World wealth is highly popular right now. He expects to have no trouble selling the carpet for $48,000.
"There are reports the private sector is getting record bonuses," says Bolour. Looking around at his wares, he says this means Wall Street's investment bankers will surely be spending some of their money in his shop. "People want unusual carpets, they want things their colleagues don't have."
One luxury that seems to have added cachet this year: a 390 horsepower silver Maserati. According to Giacomo Mattioli, a Ferrari-Maserati dealer in Beverly Hills, business is up about 20 percent this year. "We have seen the mood of the buyers improving consistently through the year," says Mr. Mattioli. "Right now they are feeling much better."