MEDIUM RISK for entreprises
In 2019, the earnings of big household appliance players will be challenged by higher production costs due to increasing R&D expenditures related to smart house appliances combined with higher input prices linked to tariffs. Moreover, market sales are expected to decelerate in 2019 and 2020 alongside the world economy. The household equipment sector is expected to see lower growth of sales at 1.8% y/y in 2019 and 3.9% y/y in 2020, compared with 4.5% y/y in 2018.
Consumer electronics will be severely impacted in 2019 (-9.4% of growth in 2019 compared with -2.9% y/y) in a context of demand fatigue for costly items and rising cautiousness among households being confronted with fiscal uncertainty (US) or political uncertainty (Europe). Domestic appliances should broadly follow the same pattern, with an expected recovery in 2020 alongside diminishing uncertainty and more support for households from governments (China and Europe in particular). Furniture sales should be more resilient (+4.1% y/y in 2019 and +3.9% y/y in 2020 compared with 5.5% y/y in 2018), thanks to a context of diminishing interest rates as central banks have already started to ease their monetary policies, bringing some support to real estate markets.
Domestic appliances: White goods’ demand should remain resilient even during a decelerating trend of growth as we expect a soft landing globally
Consumer electronics: They should suffer relatively more in 2019 and 2020 as uncertainty will prevail in developed economies, triggering a rise of saving rates despite lower inflation.
Contact Euler Hermes
Economic Research Team
Sector Risk Analyst