The Economy of 2009: Outsourcing, Free Trade and the Housing Market

Manufacturer outsourcing, free trade and a new set of presidential policies could re-shape the future of the electronics industry.

The Economy of 2009: Outsourcing, Free Trade and the Housing Market
Robert Archer · January 1, 2009

With much of the country optimistic over the impact of president-elect Barack Obama’s economic policies, custom installers are focusing on the future with intense curiosity and vigor.

There is, nevertheless, a general feeling of trepidation as America’s economic woes deepen. These economic issues cut across party affiliations or social status. If there’s one truth about the current status of the economy, it’s that it doesn’t discriminate; it affects everyone.

Likewise, consumer electronics and the custom installation markets are not immune to economic turmoil. Still, both industries are projecting growth over the next several years—even while consumers pull back on their spending.

A closer look at the economy reveals outsourcing, free trade, consumer spending and the housing market as issues that concern integrators.

Sizing up the Market

In the Consumer Electronics Association’s (CEA) semi-annual “U.S. Consumer Electronics Sales and Forecast” study, they reported the estimated growth of consumer electronics sales to be 5.7 percent in 2009, up from $173 billion in 2008 to $183 billion in 2009.

The association could revise those figures based on the unforeseen events of the fall, but based on comments from CEA president and CEO Gary Shapiro, the trade group expects consumers to continue spending on electronics.

“The CE industry is the backbone of economic activity in this country,” Shapiro said upon the release of the data.

“In a tough economy, consumers turn to CE products for many reasons—from entertaining in the home, to telecommuting to save gas,” he said. “Such factors and access to global consumers through free trade help the CE industry flourish while growth rates of other industry have either stalled or declined.”

Still, there is some good news on the housing front. Mark Zandi, chief economist for Moody’s, sees new housing starts declining further for the first half of 2009, but then turning upward again. By 2011, he predicts housing starts will be over 1.7 million units (single-family + MDU) compared to about 800,000 starts in 2008.

Even with that growth, though, installers will face challenges.

Daryl Delano, director of research for EH Publishing and CE Pro, says that it may take up to one year for CE pros to see improvements in the residential sectors.

“I think that we’ll likely be about halfway through 2009 before we begin to see much evidence that new construction and custom sales to mainstream customers are coming back,” he says.

“There’s some disagreement about the specifics, but you’ll see everyone [is] looking for horrible numbers for full-year 2008 and bottoming-out or slightly better numbers for full-year 2009.” He calls existing home sales, which is the source of much remodeling/retrofit demand, a “relatively bright spot in [what is] overwhelmingly dismal data.”

Delano says predicting the economy’s effect on the custom industry is difficult because there are no precise barometers.

“The closest we can come to the specifics of the CE market is the retail sales information from the Commerce Department’s ‘Electronics and Appliance Stores’ [data], which was up 3 percent through October of 2008, but about one quarter the average growth rate recorded during the past four years.”

Installers themselves aren’t very optimistic either. In the 2008 CE Pro Reader Survey, 19 percent of all respondents indicated that they expect their revenues to be “flat or down” in 2009 compared to those of 2008.

Two years ago, the respective expectation was a 7 percent revenue growth.

Meanwhile, the percentage of dealers expecting sales to grow more than 10 percent in 2009 is just 28 percent; last year’s survey had 39 percent of its respondents expecting that much growth.

Manufacturers are even more affected by the economic doldrums than dealers. The effects have been most reflected by a drop in exhibitors at both the CEDIA Expo and EHX Fall shows.

  About the Author

Bob is an audio enthusiast who has written about consumer electronics for various publications within Massachusetts before joining the staff of CE Pro in 2000. Bob is THX Level I certified, and he's also taken classes from the Imaging Science Foundation (ISF) and Home Acoustics Alliance (HAA). Bob also serves as the technology editor for CE Pro's sister publication Commercial Integrator. In addition, he's studied guitar and music theory at Sarrin Music Studios in Wakefield, Mass., and he also studies Kyokushin karate at 5 Dragons in Haverhill, Mass. Have a suggestion or a topic you want to read more about? Email Robert at [email protected]

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