Data released late Wednesday by MasterCard Advisors' SpendingPulse shows luxury spending dropped in June for the first time since November.
After a surprisingly solid start to the year, overall spending also has slowed in recent months, and analysts are concerned that shoppers will remain tightfisted through the crucial holiday season.
The 3.9 percent decline in luxury spending from a year earlier is particularly worrisome because the well-heeled - households with annual incomes in the top 20 percent, about $158,000 on average - account for almost 40 percent of overall consumer spending.
And a downtrend in luxury spending, which excludes jewelry but includes upscale clothing, accessories and restaurants, could signal trouble for retail and in turn for the broader economy. Consumer spending - including such major expenses as health care - makes up about 70 percent of U.S. economic activity.
Citi Investment Research analyst Deborah Weinswig and other analysts said the small increases in inventory that stores have ordered for the fall and holiday seasons could end up being too much, meaning greater discounting, which would hurt retailers' profit margins. Upscale merchants could be hurt the most, she said, because they tend to order even further in advance than other retailers.
Other figures from SpendingPulse, which tracks all transactions including cash, were mixed.
SpendingPulse saw revenue gains in clothing sales at mall-based chains but only because a large increase in children's fashions compensated for the third monthly drop in women's clothing. And spending for major home appliances was sluggish for the second straight month as government supports faded. Online spending in all categories, however, continued to increase. Consumer electronics spending also rose slightly, helped by sales of new products including the iPad from Apple Inc.
"In general, we are looking at a stable but mild growth," said Michael McNamara, vice president of research and analysis SpendingPulse, whose figures include transactions from Sunday, May 30, through Saturday.
SpendingPulse includes the top 10 percent of ticketed purchases in specific categories in its luxury tally. McNamara noted that June's decrease in luxury spending compares with a 7.2 percent drop a year earlier. The figure rose 15.5 percent in April and 9.7 percent in May.
After building overall momentum during the first quarter, "we've been just treading water," McNamara said: "Spending seems to be shifting month to month, depending on where there is a sale."
With the Dow Jones Industrial Average down 13 percent from its late April peak, the luxury slowdown wasn't unexpected: Luxury sales typically move in sync with the stock market. But they didn't fall in May, and June's drop was significant, said McNamara. That leaves little hope of a return to pre-recession levels soon.
"It isn't a good omen for the consumer recovery, which can not exist without the luxury spender," said Mike Niemira, chief economist at the International Council of Shopping Centers.
Uncertainty is growing as evidence mounts - from disappointing housing data to sluggish hiring - that the recovery could stall in the second half of 2010 as benefits of most of the federal government's stimulus spending begin to fade.
More data coming Thursday covers June revenue at selected retailers' stores that have been open at least a year, considered a key indicator.
June is when stores clear out summer goods to make room for back-to-school merchandise. But analysts say discounting on clothing was heavier than expected as stores had to work hard to pull in shoppers continuing to grapple with financial worries.
Still June's figures will look better than May because June includes part of Memorial Day weekend and because sweltering heat in most parts of the country helped to drive customers to stores to enjoy the air conditioning and buy summer tops and shorts.
Niemiera, who says he will closely monitor the figures for Saks Inc. and privately held Neiman Marcus Group, predicts the overall figure will rise 3 percent to 4 percent for June, compared with a 5.1 percent drop a year earlier. In May, it rose 2.6 percent.