The chart looks at revenues for a basket of companies that includes Tiffany, LVMH, Richemont, Prada, Burberry, Ferragamo, Hermes and a host of other companies both at the top, bottom and middle of the luxury spectrum.
It shows that luxury revenue growth topped 20 percent in each quarter for the past three years – until the second quarter of 2012. In the second quarter it fell to around 17 percent – the lowest growth since 2009. (Read more: Luxury Boom Slows in China)
Revenue growth was rising for two years straight, but started falling in last year’s third quarter.
ISI points to a few possible causes. First, the China stock market is down 35 percent and Chinese real-estate prices are falling. Those are the two main wealth engines in China.
But ISI points to another, less noticed warning sign. Chinese millionaires, it says, may be overspending.
The average millionaire in China spends $22,214 a year on luxury goods (including tourism).
That’s more than twice as much as the average millionaire in Europe or the United States spends on luxury ($10,612 in Europe and $9,431. Millionaires here are defined as people with net worths of $1 million.)
Luxury companies might look at the spending number and see great opportunity in China. Yet the high spend rate may also be a sign of unsustainable burn rates by the Chinese affluent, with women buying 5 to 6 Louis Vuitton bags at a time. (Read more: Ferrari Crashes Spark Rage in Asia)
It’s too early to write off China’s luxury growth. But after the feverish run-up in 2010 and 2011, a new era of austerity among the new Ka Ching dynasty might be expected. Perhaps they’ll have to cut down to just two or three Vuitton bags at a time.
-By CNBC's Robert Frank
Follow Robert Frank on Twitter: @robtfrank