Despite macroeconomic headwinds, the luxury sector is on track for another record-breaking year.

The personal luxury goods market is set to grow between 5 and 12 percent in 2023 to between €360 billion and €380 billion, according to a new joint report from consultancy Bain & Co. and Italian trade group Altagamma, an increase on their previous 3 to 8 percent growth forecast.

Amid a major slowdown in the US and South Korea — two countries where sales of luxury goods surged in the aftermath of the pandemic — growth this year will be primarily driven by a rebound in spending by Chinese consumers, a strong Japan market and continued resilience in Europe, buoyed by an increase in tourist flows.

Brands won’t feel the impact equally, however.

“We are seeing a market that is going in many different directions, with different acceleration and deceleration in different geographies, but also a very polarised performance among brands,” said Bain partner Claudia D’Arpizio. “After a year last year where everything grew…we are now in a year where we are seeing different speeds and a lot of dichotomies.”

Concern over how long the post-pandemic luxury boom can last has lingered as the sector faces global macroeconomic headwinds. In the US, aspirational consumers have already pulled back on luxury spending amid economic uncertainty and the end of Covid-era stimulus payments to consumers. Shoppers are also prioritising spending on holidays and eating out over handbags and shoes.

Globally, the ultra-wealthy are buoying the market, with industry growth coming from increased sales of higher-ticket items and price hikes rather than greater overall volumes, D’Arpizio said. Demand for product categories that sit at the top of the luxury pyramid is booming, she said.

Top-tier luxury names more heavily exposed to wealthier clients are set to outperform the rest. This is particularly true in China, where only top brands are expected to return to 2021 sales levels by the end of 2023.

Chanel, Hermès and LVMH are among those that have benefited from the shifting landscape, and are continuing to invest heavily in categories like high jewellery and exclusive services for top clients.

But if recent efforts to court top clients have paid off, they have also served to ratchet up expectations. Keeping top customers engaged is harder than ever and scale is a huge advantage.

“Consumers are just getting more sophisticated. The cost of doing business is keeping this customer engaged, always increasing the level of service and the level of communication,” D’Arpizio said.