Consumer electronic spending will defy global slowdown

Demand for the latest gadgets will continue, even if the slowdown in the US economy hits the UK hard

Analysts expect that UK consumers will increase their spending on consumer electronics devices, despite fears of an impending recession.

The predictions came as electrical retailer Dixons announced strong growth in sales of mobile phones, digital cameras, handheld computers and peripherals over the last year. This helped Dixons to overcome a drop in demand for PCs. The retail giant -- which owns Curry's, PC World and mobile phone shop The Link -- claimed on Wednesday that it would benefit from further growth in the consumer electronics sector in the next year.

It may sound odd to predict growth, given that many technology companies are sacking staff because of the slump in the high-tech sector. But Jason Armitage, senior research analyst at IDC, believes that many electronics gadgets will be increasingly popular, even if the general UK economy isn't doing well. "Although it's true that an economic decline leads to pressure on disposable income, many markets are more determined by product cycles," explained Armitage.

Dixons made a profit of £647m in the year ending April 2001, compared to £472m the year before. Most of the increase was due to the £404m paid by Wanadoo for a 79 percent stake in Freeserve. Taking away exceptional items and the Freeserve windfall, Dixons profits were up 5 percent. The company's UK retail division saw profits up 11 percent, as like-for-like sales rose 3 percent.

Dixons will be hoping analyst optimism about consumer devices will prove to be justified. Having weathered a slowdown in demand for PCs, it is now preparing for a similar drop in demand for mobile phones, and is relying on strong growth in certain areas. "We expect key areas of growth to include the new generation of games consoles, flat screen PCs and TVs, digital imaging products and mobile data devices," said the company in a statement.

Armitage believes that the gaming devices sector is at the start of a period of major growth. "With Sony looking to boost sales of the PlayStation2, and Nintendo releasing the Gameboy Advance, the console sector is set to show significant growth," he said. Armitage expects revenue from console sales in the UK to almost double to £485m this year, and -- with Microsoft's Xbox set to launch in Europe early next year -- he predicts total console sales to be worth around £711m in 2002.

Consumers planning to purchase an MP3 player or digital camera in the near future should be looking out for bargains. Armitage expects there will be good volume sales of both products, but that manufacturers may start reducing prices in an attempt to maintain market share. "If the global economic decline continues, then we could see heavy price discounting," he said.

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