Friday, May 8, 2009

When TV is no longer a necessity

May 4, 2009

Survey findings an eye-opener for Asia on how Americans view everyday items

By Bhagyashree Garekar

ASIA'S most important customers, the Americans, are looking at everyday items such as the TV set, air-conditioner and microwave in a new light - as luxuries rather than necessities.

The new trend may upend decades of assumption that Americans will keep on driving the exports of such goods from Asia.

'No longer do substantial majorities of the public say a microwave oven, a television set or even home air-conditioning is a necessity,' said a new national survey by the Pew Research Centre's Social & Demographic Trends project.

'Instead, nearly half or more now see each of these items as a luxury.'

What makes these recession-era re-evaluations all the more striking is the fact that the public's perception of what counts as luxury and what is a necessity had been moving in the other direction for the previous decade.

Take the microwave oven. In 1996, just 32per cent of Americans deemed it a necessity. A decade later, 68per cent were willing to swear they could not live without it. Now, only 47per cent feel that way, the Pew survey said.

Another example - the TV set. It has been thought of as a must-have by clear majorities of Americans since 1973, when the question was first asked. Today, just 52per cent of them say so - down 12percentage points from 2006's figure and the smallest share ever to call a TV set a necessity.

Two factors are at work in shaping these new attitudes, said Mr Richard Morin, a co-author of the report.

First, the recession. 'Nothing like the bad economic times to focus the mind. Many Americans are reviewing the basics - how they live, what they have and what they need and this is triggering a rethink,' said Mr Morin.

Simultaneously, the message of thrift is coming on strong. Not just from President Barack Obama, who has often criticised the culture of 'irresponsible spending', but also from family, friends and neighbours who lately see it as their business to drill in the dangers of living beyond one's means.

Second, evolving technology is downgrading the status of some products.

'The young, for example, are abandoning TV in droves, but it's important to understand that they are not abandoning TV shows, only that they are watching them on their computers and are also getting other forms of entertainment,' said Mr Morin.

It is stunning that change occurred in just a short period of three years and reverses some long-standing trends, he added. 'We found it surprising that it involved a kitchen staple like the microwave,' he said.

The other surprise was that the shift was so broad.

'There is no generation or gender gap here. We found a consensus across demographic groups - the rich, the poor, the men, the women, the old and the young.'

The critical thing, from the point of view of the manufacturers of these products, is whether people will fall back in love with these items when the recession ends.

'It's an open question,' said Mr Morin, pointing out as an example that petrol consumption - which fell when the price went over US$4 (S$6) a gallon - has not returned to its previous levels, although the price has retreated.

'If I were an exporter in Asia, I'd watch this space. Data suggests a new frugality, that demand may not return to previous levels. The way Americans think about items is changing.'

The study also establishes that as many as eight in 10 Americans have taken specific belt-tightening steps to ride out the bad times. Almost six in 10 are shopping more in discount stores or are passing up brand-name goods. One in four has cut back or cancelled cable or satellite television services.

The DIY culture is also making a comeback. One in five has started mowing their own lawn or doing home repairs, rather than pay others for the service.

Mr Clyde Prestowitz, founder and president of the Economic Strategy Institute, a public policy research organisation in Washington, said he found the survey hard to believe.

But the signs also point to a larger shift in the nature of the global economy, said the author of several books dealing with the economic rise of Asia, the upcoming rebalancing of the world economic order, and its impact on the United States.

'What is certain is that the American consumer will consume less. With that, it is becoming clear that the export-led growth strategy of many Asian nations - China, Japan, South Korea, Taiwan and Singapore - is in future not going to be as powerful as it used to be.'

People in Asia seem worried about rising protectionism, he added, whereas the bigger problem is that American consumption is not going to be growing any more.

'Policymakers are mistaken if they think that once this recession ends, it will be back to business as usual. There is no certainty that consumption will recoup.'

[An economic model of growth based on consumption to the point of poverty is ultimately unsustainable. Export-oriented economies will need to find a new business model as the US can no longer be the consumer of the world's products.]

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