What: Investors and consumers are becoming nervous about China’s post-pandemic recovery as its economic data is looking shaky.

Why it is important: For the luxury industry to maintain its strong growth, China needs to pick up the slack as the US market slows.

Concerns over the risk of deflation in China's C-shaped recovery have led to caution in the luxury goods market, with a slowdown in the US market and an emerging Covid wave contributing to pessimism.

China's importance to the luxury industry means that, in order to maintain the strong growth of recent years, the US market must be replaced.

Despite the pent-up demand for luxury goods in some quarters, China's recent economic instability, particularly in relation to the property sector, may impact investors' expectations.

Further instability could lead to a decline in the luxury goods market, with European luxury stocks particularly vulnerable.

Companies like LVMH, Hermès and Richemont are well-placed to weather any downturn thanks to their size, investment opportunities, and long-standing reputation, while Kering and Burberry look more vulnerable.

The luxury party is fizzling in China