CEA Lowers Holiday Forecast From 3.5% to 0.1% Growth

The Consumer Electronics Association (CEA) has backed off its October prediction that consumer electronics (CE) spending would grow 3.5 percent in 2008 versus 2007.

The new forecast is for 0.1 percent growth.

"After receiving various data, we've adjusted models," says CEA economist Sean DuBravac.

"We now project flat growth for Q4 2008."

The audio/video category was "notably weaker," he adds. Instead of its previous prediction that A/V would be up 3.9 percent, CEA now predicts A/V spending will be down 4.8 percent.

A big reason for the fall in audio/video spending, according to Tim Herbert, CEA's senior director of research, is that consumers are "downsizing." In other words, they are choosing smaller screen sizes, buying TVs with less rich features and opting for more generic brands.

The scaled-back predicted growth is a sign of the times, explains CEA's senior vice president of industry affairs Jason Oxman.

"Although CEA certainly took price declines and weakness in consumer demand into consideration, the severity and the speed of declines in these unprecedented times caught everyone off guard," he says.

"Consumer sentiment is improving, but shopper unease this holiday season is creating challenges for all sectors of the economy, including consumer electronics."

One category that held up well is Blu-ray, according to DuBravac. CEA had previously projected that there will be 2.8 million Blu-ray units sold in 2008.

"Just a few weeks ago [that milestone] looked tough to hit," he says. "We are on track now to slightly surpass our [Blu-ray] projection."

The reasons for the surge in Blu-ray sales, according to DuBravac:

• Aggressive promotions
• Aggressive pricing

"We didn't expect to see many units below $250 a few weeks ago but during the [Black Friday] weekend we saw prices from $128 to $200."

The CE retail industry's challenge should continue into 2009, adds DuBravac. "On a macro level it looks like it will be a more difficult year than 2008. We have a ways to go before consumers feel good about their situation."

The recession, which was recently officially declared, "will go into April or May" of 2009, DuBravac predicts. That, he adds, will make it the longest recession the U.S. has experiences since World War II.

DuBravac predicts that the U.S. economy will "turn toward the end of 2009."

Related: Black Friday Shopping Grows Despite Economy, Study Shows