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CEA: Consumer Confidence Low

New York — The Consumer Electronics Association (CEA) reported that as of Nov. 8, 90 percent of consumers believed the economy is worse today than this time last year.

This is according to a survey of 1,000 U.S. adults conducted Nov. 6-9. The number is up 3 percent from the

same survey when it was performed in September.

While the report confirmed that CEA’s forecast that the industry will see 3.5 percent growth overall in the fourth quarter, CEA also reported economic concern from within the industry. It said 10 percent of its CEA Advisory Panel recently surveyed said, “Tightening credit had a severe negative impact on their business,” and 37 percent reported a “moderately negative impact.”

These numbers were unveiled last night at CES Unveiled, the media event previewing International CES 2009, here, during a presentation by Steve Koenig, CEA industry analysis director, and Tim Herbert, its research senior director. The men gave an update on CEA’s expectations for the holiday selling season based on the organization’s latest research, and they also provided insight as to what CEA’s trend expectations are for CES and the year to come.

Looking at the holiday season, CEA is reporting that consumers expect to pull back on their holiday spending this year by an average of 14 percent. Last year the average consumer’s total holiday expenditure was $1,671; this year it is expected to be $1,437.

That is how it stands for now, though the organization found that one in four consumers are waiting until later in the season to being their shopping, so as Herbert said during the presentation, a clearer picture of consumer spending may not appear until later in the holiday season.

The primary reasons surveyed consumers cited for cutting back on their spending were “increased cost of living” (75 percent), “concerns with the economy” (74 percent), “don’t have the money” (64 percent) and “earning less money” (34 percent.)

Looking exclusively at gifts, the CEA expects overall gift expenditures to drop, but it is confident that consumer electronics will fare well relative to other product categories. CEA expects a 15 percent net reduction in gift spending, but sees an increase in the amount of gift budgets consumers expect to allocate to CE products; that number jumped from 22 percent reported last year to 28 percent this year. Simultaneously, CEA reported that 79 percent of surveyed adults expressed interest in receiving CE gifts, up from 75 percent last year.

This increased interest in CE on the part of both givers and receivers despite the larger declines in expected spending was interpreted positively by Koenig and Herbert. They said the numbers point to the relative strength of CE compared to other categories.

Herbert said the numbers underlined the idea that CE products are “no longer viewed as luxury products.”

During the presentation, Koenig and Herbert reiterated CEA’s forecast that the industry will see 3.5 percent overall growth in the fourth quarter. Certain categories like “GPS and in-car video” and “mobile phones” are expected to see significant growth within their own categories, with a respective uptick of 30 percent and 11 percent each.

Koenig was especially enthusiastic about GPS, noting that even though the category is “starting from a small base, the growth rate is phenomenal.”

As for Black Friday, CEA is reporting that 28 percent of consumers plan to shop for gifts during Thanksgiving weekend. The primary forces consumers said were driving them to shop that weekend, in order, were a desire for bargains and sales, a desire to finish shopping early, a desire to purchase products before they sell out and a desire to partake in the “fun/social aspects of shopping.”

Going beyond the holidays, Koenig and Herbert looked at the trends CEA will be expecting to play a significant role at CES and into next year. The organization is expecting “green” technology, manufacturing processes and recycling efforts to play more of a role in consumers’ purchasing decisions. It is also expecting an evolution in command, control and display technologies as well as an increased presence of embedded Internet in more and more products. Finally, CEA also expects consumers and the industry to place increase importance on the fluid transport of content and data from one product to the next for more streamlined experiences, a phenomenon CEA referred to as a “No Strings Attached Connections Dichotomy.”

To hear more from Tim Herbert, be sure to sign up for TWICE’s State of The Industry Webinar, taking place Friday, November 14 at 2 p.m.

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