The world's major technology companies are trying to convince consumers they need an expensive, digitally connected home with the latest high-tech gadgets.
But there's a problem: an increasing number of consumers are having trouble just paying for the roof over the heads, much less a 380cm (150in) television.
Few company executives at the annual International Consumer Electronics Show (CES) in Las Vegas this week could avoid questions about the state of the US economy, and the combination of a surge in the jobless rate, oil hovering around $100 and a worsening credit and housing crisis has many on edge.
CES attracted about 140,000 attendees to a venue covering 167,000sq m (1.8 million sq ft) and featuring everything from 250cm (100in) TVs and sophisticated car navigation systems to quirky "zero-gravity" massage chairs and even a robot that cleans gutters.
Despite a series of poor reports of Christmas retail activity, executives at the show and analysts watching the industry's largest US gathering said they felt confident about the current state of the industry. However, they are uncertain about the rest of the year, when some economists expect the US to slip into recession as the housing crisis worsens.
"Consumers are under intense pressure," said David Daoud, a personal-computer analyst at market researcher IDC.
"With the price of energy continuing to increase and a lot of people seeing the value of their houses dwindle, it will certainly lead to an amount of tension among consumers," he said. "The question now is, are manufacturers responding to that."
Before Christmas, technology had been viewed as a safe haven for investors fleeing housing, banking and consumer-discretionary stocks. The Standard & Poor's information-technology index has added 5.6 per cent in the past 12 months, beating the S&P 500's 0.5 per cent decline and the Dow Jones Industrial's 2.6 per cent gain.
But investor sentiment has changed in the past week, after DSG International - the British parent of PC World, Dixons and Currys - sent European retail stocks diving when it warned that full-year pretax profit would miss analysts' estimates because of falling desktop computer sales and weaker-than-expected laptop PC demand. A series of recent analyst downgrades of technology stocks, including Intel, contributed to declining confidence in the sector.
While many products at the Las Vegas show may never reach store shelves, collectively they serve to generate consumer enthusiasm for an industry that the show's organiser, the Consumer Electronics Association, expects will generate $171 billion (€117 billion) in sales this year.
The amount is a 6.1 per cent increase from 2007's total but less than last year's 8.2 per cent surge, the group said on Monday.
Besides technology, "the other overriding issue of focus is the state of the global economy, as CES serves as a crossroads for large companies from multiple geographies", Bear Stearns analyst Andrew Neff wrote in a note to investors. "Visibility remains limited."
Fears of a deteriorating US economy and falling DVD sales helped drive Warner Bros' decision last Friday to exclusively back Sony's Blu-ray next-generation DVD format, in a blow to Toshiba's rival HD DVD format, a top studio executive said on Monday.
"We've typically been recession-proof," Warner Bros Home Entertainment president Kevin Tsujihara said at the Las Vegas show. "But the thing we saw in the fourth quarter . . . was gas prices beginning to affect sales. And since we're considered an impulse purchase, it's beginning to impact us."
