CE Spending: A Tale of Two Continents

Tech stock guru Paul Carton had an interesting piece on the (relative) decline of consumer electronics spending here in The States. Over at the Seeking Alpha website, he broke down the result of the latest ChangeWave survey, which tracked anticipated consumer electronics spending in light of the forthcoming (and generally lucrative) back-to-school season.

The results? Meh.

Only 15% of respondents said they'd spend more on electronics over the next 90 days, with nearly 34% saying just the opposite. The difference between these two groups, notes Carton, is 13% lower than at this time last year. Not exactly an inspiring endorsement of the CE market.

The results are largely the same on the personal computer front. With the slight exception of Apple laptops and desktops, PC buying among consumers is also down from this point last year, by roughly 2 percentage points.

And why is Mac the exception? Could it have something to do with the new 3g iPhone?

"A total of 17% say they’re now more likely to buy an Apple laptop or desktop in the future because of the 3G iPhone; only 1% said less likely," writes Carton. "These highly positive findings point to the 3G iPhone having at least some “Halo” effect on Mac sales going forward."

Carton does not delve into why this downward trend persists (though I'm sure he knows), opting instead to crunch the numbers from an investor's perspective. He does this quite well. I submit to you that these numbers signify the start of what will be a long and disturbing trend in CE spending, and I credit this (no pun intended) to the rapdily deteriorating US credit markets. There are other factors such are contributing to this (inflation comes to mind), but in sum, the less credit people have, the less spending they're capable of. This applies just as much to consumer electronics as it does to cars, homes and vacations - all of which are sinking like a stone.

Such is NOT the case in India, interestingly enough, where global consumer electronics is projected to grow by nearly 10%, making it a $700 billion industry by the end of this year. Uday Nayak covered this subject recently on business-standard.com. "Interestingly, this projection has been made in the face of rising oil prices globally, accelerating inflation in both China and India and a gloomy US economy," writes Uday.

With a population clamoring for products like LCD TVs, DVDs, mobile phones, camcorders and other familiar gadgets, India and the other East Asian manufacturing giants are expected to enjoy what Uday calls "industry confidence" for much of the foreseeable future.

Industry confidence for consumer electronics WILL return here to The States. That is a virtual guarantee. But when? That's anyone's guess.