After a record-breaking 2022, the fine art market has crashed harder than a Jeff Koons balloon dog sculpture knocked off its pedestal by a clumsy gallery-goer.
Driving the news: In the first five months of the year, overall global fine art sales have dropped by 14% compared to the same time last year, while sales at the Big Three Auction houses (Sotheby's, Christie's and Phillips) dropped a whopping 20%, per Artnet.
- Sales of ultra-fine art (works priced US$10 million and up) saw the steepest drop, generating 51% less revenue than last year as appetite for pricy pieces dried up.
Why it matters: A slumping art market could mean the ultra-rich are beginning to pull back their spending as the effects of tightening monetary policy take their toll. This could end up being a good thing, as well-off consumers can disproportionately skew inflation data.
- Or it could be a really bad thing, as some economists think a slowdown in luxury spending could be a sign of an impending recession—known as the ‘lipstick effect.’
Zoom out: Major luxury brands like LVMH and Kering reported dwindling sales revenue last quarter, secondhand luxury watch prices recently hit near two-year lows, and (despite how much we love talking about them) super-yacht ownership is actually on the decline.
Bottom line: Recession indicator or not, when the ultra-rich are deciding that Picassos and Patek Philippes aren’t worth buying, it makes us want to double-check our budget. —QH