Who’s Going to Blink First

TV Sales Becoming Litmus Test for U.S. Economy - NYTimes.com

The attached article talks about how many economists and electronics industry analysts are using sales of televisions as a litmus test for the American economy. Sales of high-definition and flat-screen TV’s were, until recently, been increasing rapidly as prices dropped, more HD channels became available, and people prepared for the national switchover to digital broadcasting occurring on February 17, 2009. These sales, however, have slowed significantly in the past few months. Retailers are not able to move the products as swiftly as expected, and as a result, have aggressively advertised sales, discounts, package savings, and extended price guarantees leading into Black Friday.

The early word is that TV sales have not been as high as the retailers had hoped. There currently looks to be a stand-off between the customers and the retailers. The manufacturers have claimed that the prices are “to the point of irresistible”, but the customers think that, “I’m sure the price is going to comedown.” The article asks the question, “Who will blink first?”

Not the consumers.

The consumers have no driving impetus forcing them to make these purchases. Sure there will always be people buying TV’s because they have too much money to spend or they need to replace a broken TV, but for the most part, purchasing a large flat-screen, plasma, or high-definition TV is a luxury. It’s a discretionary purchase. This is the reason the customers are not going to blink first. The discretionary budgets aren’t there like they were a short time ago.

The US is entrenched in the largest economic crisis its faced in decades, and it doesn’t look close to being over. In fact, now much of the rest of the world is slipping into a recession. House prices are dropping. People owe more on their mortgages than their houses are worth. Unemployment is rising quickly. I believe that people aren’t buying TVs now because (1) they don’t have the money (2) they are saving their money in anticipation of a difficult time, or (3) they are waiting for a really, really good price.

So who’s going to blink first? My money’s on either the manufacturers or the retailers. They need to make the sale worse than the customers need to buy the product. So TV sales do seem like a pretty good litmus test for the American economy, we just might not like what they tell us.