By Andrew R. Johnson Of DOW JONES NEWSWIRES ORLANDO, Fla. -(Dow Jones)- Growth of consumer spending on luxury items dipped in March and April, a potential "cause for concern" about future economic growth, a MasterCard Inc. (MA) executive said Wednesday. The dip is likely due to rising gasoline prices in the first quarter, a slowdown in travel to the U.S. by European consumers and other factors, Tim Murphy, chief product officer for MasterCard, said during a presentation. "The luxury sector in the last two months has really experienced some down-drafts relative to the overall economy," Murphy said. The luxury category includes things like high-end apparel and travel, though it excludes jewelry. Specifically, spending in the category increased 1.8% and 5.5% year-over-year in April and March, respectively, down from 11.7% in February. The calculations are based on spending trends MasterCard tracks over its payments network. The trend could be a "one-time" blip, though "if we continue to see these trends it could be a signal of a tighter economic environment going forward," Murphy said on the sidelines of Card Forum, a payments-industry conference sponsored by publisher SourceMedia Inc. The dip comes as MasterCard is beefing up its efforts to help banks attract more affluent cardholders, the primary drivers of luxury spending. MasterCard, like its larger rival Visa Inc. (V), do not lend or issue cards to consumers; rather, they operate payments networks that help process card transactions for card-issuing banks and merchants' banks. Affluent customers, which MasterCard defines has having $100,000 or more in household income, are of "outsized importance" because they account for a disproportionate share of payments growth relative to other consumers, Murphy said. "They punch substantially above their weight in terms of their importance in the spending environment," Murphy said. For banks, who are struggling to grow credit-card loans, affluent customers are coveted because they tend to use their cards frequently, helping grow fees that they earn from merchants each time a consumer swipes a card. Higher spending also benefits MasterCard and Visa, because they earn fees as well from card-issuing banks and merchants' banks. Affluent consumers helped some of the largest credit-card lenders, like American Express Co. (AXP), more quickly bounce back from the recession, when consumers fell behind on their bills and sent loan losses surging for many lenders. MasterCard has developed several services aimed at garnering a larger share of affluent spending, including Priceless Cities, a campaign that is live in New York, Toronto and other cities that gives its cardholders access to exclusive events. It also is tailoring debit and prepaid cards, often associated with more budget-minded consumers, to high spenders. It has developed a "World Elite" debit card that is targeted to private-banking clients and comes with special perks often associated with credit cards, and prepaid-card programs aimed at families who want to budget spending for their children. "I think this is the kind of prepaid product that can be very relevant in affluent households," Murphy said. -By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; andrew.r.johnson@dowjones.com
