After reaching parity with the dollar, the euro has fallen below the symbolic threshold of the American currency. A look at the positive effects this will have for the luxury goods industry, in particular.
This is historic. This is the first time the European currency has fallen below the dollar in the 20 years the euro has been in circulation. Indeed, on Wednesday 13 July, the euro fell to 0.9998 dollars at midday, after having fallen in value by 15% for a year.
The causes are the situation in Ukraine, the fear of a recession, inflation, among others, which may further encourage the depreciation of the euro. If this economic crisis has heavy effects on the purchasing power of consumers, who see imported products becoming more expensive, there are some for whom this crisis is beneficial.
The luxury and tourism sectors, favored by the situation
Although the French are currently suffering from the fall of this currency, exporting companies are benefiting. Several sectors are concerned, “globally the very internationalized sectors” according to Patrick Artus, economic adviser of Natixis. Luxury goods in the first place, manufacturing, aeronautics, pharmaceuticals, and perfumery.
European goods sold abroad will be more competitively priced, which will encourage exports from the above-mentioned sectors. This also applies to the food industry, especially wine. Some companies such as Hermès or Pernod Ricard are also “discounted”, says Christopher Dembik, director of macroeconomic research at Saxo Bank.
Tourism, especially high-end, should benefit Americans. American tourists, who are the biggest spenders on luxury goods, are currently very present in France – particularly in Paris – and in Europe, and their purchasing power should therefore be positively impacted. This will once again favor the luxury sector.
The latter, which “can afford to pass on additional costs to its customers” according to Dembik, should therefore benefit greatly from the fall in the euro.
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