After a difficult 2016, the luxury industry has shown positive signs in the first quarter, with a growth of 4 percent, and the global luxury market is expected to grow by 2 to 4 percent this year. These are among the key findings from Bain & Company's “Bain Luxury Study 2017 Spring Update,” which was released at the end of May. Bain's study is published in collaboration with Fondazione Altagamma, the trade association for Italian luxury goods manufacturers. In 2017, total revenues in the sector that includes watches, jewelry, clothes, shoes and leather goods will grow to between €254 billion and €259 billion as compared to €249 billion in 2016.

The small projected growth will mainly be driven by increasing customer confidence in Europe and a Chinese rebound, with Chinese customers purchasing more, both at home and overseas. The luxury market is still trying to recover from a difficult period as a result of a widespread economic crisis, slower growth in China and the impact of terrorism on spending in key countries.

Europe is expected to be the fastest growing market, with sales of luxury goods growing by 7-9 percent at constant exchange rates in 2017. The continent is recovering from decreased tourist flows last year, and confidence among local consumers is also increasing. Spain and the U.K. stand out as bright spots. Spain is perceived by tourists as a safe destination while the U.K. has been benefiting from a post-Brexit weaker pound.

In the Americas, the outlook for 2017 is between a 2 percent decline and no variation. The U.S., the largest luxury goods market, continues to under perform and the combination of a strong dollar, ongoing political uncertainty with the new presidency and struggling department stores is generating an uneven outlook for the remainder of the year. Canada remains dynamic but is likely to slow, according to analysts. Latin America is supported by some local consumption.

China is expected to grow by 6-8 percent this year driven by local consumers, who are showing a strong preference for purchasing luxury goods at home. Chinese tourists, however, will continue to account for a substantial share of luxury purchases abroad. Japan is a safe but mature market for luxury brands and the country is expected to record flat growth for the year. The rest of Asia is expected to show a decline between 2 and 4 percent as the environment remains difficult, according to Bain. Hong Kong, Macau and Singapore are recovering, but Taiwan and Southeast Asia are confronted with decreased tourism, especially from China and South Korea. The rest of the world is expected to be flat or see slight growth of 2 percent.

Bain predicts that the overall market will reach €280-290 billion in sales by 2020, growing at an average annual rate of 3-4 percent. The increase will be driven by a growing Chinese middle class and a recovery in more mature markets. Omni-channel sales strategies will be key in the evolution of the market. Bain also estimates that tech-savvy millennials will represent 45 percent of the overall luxury consumption by 2025, with Asian consumers accounting for more than half.