Strong demand = no price cuts

NEW YORK - Americans hoping to save on European goods, thanks to a falling euro shouldn't rush to uncork that bottle of French Bordeaux. There's very little to celebrate.

Not since September 2003 has the euro traded this low against the dollar. Still, German sports cars, Belgian beers and the latest fashions out of Italy aren't going on sale anytime soon. The reason? There's simply too much demand in the U.S. for any markdowns.

"The U.S. economy is the one that's doing well in the world right now," IHS senior principal economist George Magliano said. "We've got a lot of growth in upper-income families and households."

Since Americans are willing - and able - to spend heavily on imported goods, there's no need for companies to cut prices. Any savings thanks to the euro's decline will instead be pocketed by manufacturers and distributors.

It has been a dramatic fall for the euro. It extended its slide Thursday, dropping more than 2 percent against the U.S. dollar, after Mario Draghi, president of the European Central Bank, delivered the news that it was ready to buy government bonds on a massive scale to oil the wheels of the eurozone's ailing economy.

The 1.1 trillion euro program was an emphatic signal of the central bank's willingness to do all it can to rejuvenate the economy shared by the 19-nation euro-currency alliance.

The program's chief mandate is to maintain price stability. Draghi pledged to extend the bond buying if needed. Fears have spread that the eurozone could face chronic falling prices, or deflation.

The problem for Americans: We don't buy enough European goods, except for high-end products. Our clothes might come from Bangladesh or Costa Rica. Our furniture from China. And our cars - even foreign brands like Honda - are mostly made at home.

European brands tend to cater to higher income families who want to buy a bit of prestige.

Take German cars. Brands like Audi, BMW and Mercedes are luxury products with strong demand. So there's no incentive to cut prices, says Karl Brauer, senior industry analyst for Kelley Blue Book.

But even if prices go down on high-end European goods, shoppers won't feel it. Price tags have been soaring way out of reach for most Americans over the past few years.

For example, Chanel's classic handbag, which was priced at $2,250 in 2007, cost $4,900 last year, according to Robert Burke and Associates, a luxury-consulting firm. And Louis Vuitton's iconic monogram canvas handbag, which sold for $620 in 2007, climbed to $970 last year. The one bright spot for Americans: Vacations to Europe are now much cheaper.

Thanks to the currency shift, travelers will pay less for hotel rooms, museum admissions and meals out.

"It's basically a 20-percent-off sale on the whole eurozone for Americans," said Adam Goldstein, CEO and co-founder of airfare search site Hipmunk.

"This is the best time to travel to Europe in years," says Anne Banas, executive editor of SmarterTravel.

The catch: It will still cost a lot of money to get to Europe during peak summer months. Demand for travel is so strong that most airlines don't have to cut prices to sell seats.