Is Consumer Electronics Spending Immune To The Weak Economy?

The economy is still slowing.  Retail spending is spotty.  Housing is still in the toilet.  Unemployment remains at the nosebleed level.  And unease about leadership is near an all-time high.  So ask yourself this question, “How are consumers still optimistic about their spending on consumer electronics?”  A report today from the Consumer Electronics Association showed that consumer confidence in technology actually improved in August even though the measurement also showed that confidence in the overall economy has now hit a new low for the year.

The CEA Index of Consumer Technology Spending rose 4.6 points to 84.4 and that is the highest reading since January.  It is also up 4.6 points from August 2010. This is almost shocking when you consider that consumer confidence in the overall economy is down for the fourth consecutive month.  The CEA Index of Consumer Expectations fell by 0.3 points to 158.8, the lowest level since reaching an all-time low of 157.8 in August of 2010.

Shawn DuBravac, the chief economist at CEA, noted, “As consumers pull back spending in other categories, technology continues to benefit… Interestingly, despite the instability on Wall Street, consumers are showing some optimism that things will improve over the next year.”

The weak economic environment was described as ‘unrest with the economic landscape’ and it also noted increased volatility in the financial markets.

What is interesting is that it was just in May the CEA gave a figure that the average U.S. household spent $1,179 on consumer electronics products in the past 12 months.  It also noted that the average household spent $201 less on consumer electronics devices in the past year compared to the year before.  It further noted at the same time in May:

• The average adult spent $652 on CE products in the past 12 months, down from $794 the 12 months before.
• Women spent, on average, $520 on CE, down $111 from last year’s study.
• Men reported personally spending $793, down $176 from the 12 months before.
• The average household reports owning 24 discrete CE products, down slightly from 25 devices last year.

In July, the CEA also noted that the rise of mobile connected devices was contributing to this surge.

Some worries about electronics may be overblown if the data here is accurate.  The recent drops in many of these stocks may represent a huge opportunity, but this may just be a death trap if things go from bad to worse.

JON C. OGG