Thursday, January 20, 2005

While inflation is bubbling up here and there across the US economy, firms selling electronics aren't anywhere near the Land of the Rising Price.
Sony sent another shock wave through markets on Thursday after warning profits for its current business year would be significantly lower than previously forecast.

The consumer electronics and entertainment group said operating profits in the year ending March 31 would be 31 per cent lower than it had expected at the end of the first half due to plunging consumer electronics prices and changing market trends in its core TV and audio segments.

The profit warning highlights the severe impact sharp price falls are having on consumer electronics manufacturers and raises concerns about Sony�s recovery prospects in particular.

�Prices are falling at a speed that could not have been imagined in the past,� said Katsumi Ihara, chief financial officer. Although Sony has increased market share in many of its main product areas, it was unable to cut costs in line with the fall in market prices, he said.
The BLS data shows that the "video and audio" group (including equipment, media and services) has seen steadily falling prices since April, since then at a -1.1% annualized clip. The story is, of course, much much worse in "information technology, hardware and services" where in 2004 the inflation rate ran at -8.1% and dropped off especially at the end of the year; in the last quarter of 2004 the sector saw an annualized inflation rate of -13.6%.

Deflation still rules his own kingdoms, although he has been beaten back substantially since late 2003.

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