Forget the economy, buy your kid a pony

By Emily Kaiser

NEW YORK (Reuters) - Oil prices and interest rates keep climbing, but U.S. consumer products makers remain confident that shoppers will shell out $300 for a toy pony or $3,500 for a high-tech refrigerator.

Economists and investors alike are watching carefully for any sign of a shopping slowdown because consumer spending accounts for about two-thirds of U.S. economic activity.

Discount chains such as Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research, Stock Buzz) have warned that steep gasoline prices were curbing spending, but executives who spoke at the Reuters Consumer and Retail Summit in New York this week seemed generally unfazed.

To be sure, executives all said they were keeping a watchful eye on the macroeconomy -- particularly rising raw materials costs. But they saw few signs of a spending pullback yet, and plenty of reasons to believe that shoppers were still willing to pay for quality and innovation.

"Parents still want to make sure kids have great birthdays," said toymaker Hasbro Inc.'s (HAS.N: Quote, Profile, Research, Stock Buzz) chief operating officer, Brian Goldner. "They don't want their kids to go without toys."

He said that 75 percent of Hasbro's offerings are priced below $20, but the company is also coming out with a life-sized miniature pony called "Butterscotch" that will retail for around $300 this holiday season.

Guitar Center Inc. GTRC.O Chairman and Chief Executive Marty Albertson has been through his share of economic slowdowns during more than two decades with the company, and is confident that musicians still need $2,000 guitars.

For aspiring rock stars, "the purchase of a musical instrument is right after bread and milk," Albertson said. "It's not the purchase of a discretionary piece of entertainment. A plumber has to have a wrench in order to do their job. A musician has to have a guitar."

BELLS, WHISTLES AND WEATHER REPORTS

LG Electronics Inc. (066570.KS: Quote, Profile, Research, Stock Buzz), which recently began selling its high-end appliances in the United States, said consumers are willing to spend more for new technology and features, regardless of the economy.

"There has been a shift in (buying) behavior," said Tim Kavanaugh, LG's director of merchandising. "Now that they have discovered that appliances can be exciting and fun, they are more likely to delay a purchase than to revert back to buying on price."

LG recently introduced a $3,500 refrigerator with a television as well as a smaller screen that gives real-time weather updates. It also has a USB port so that consumers can upload family slide shows.

It isn't only the wealthiest consumers who are buying high-end appliances. Whirlpool Corp. (WHR.N: Quote, Profile, Research, Stock Buzz) said the average household income among buyers of its $2,000 Duet washer-dryer set is $40,000 a year.

Still, some consumer products makers are hedging their bets.

Privately held MGA Entertainment, which makes Bratz fashion dolls, is coming out with a $100 Bratz dollhouse, complete with a disco and working fountain.

CEO Isaac Larian said he expected to sell 250,000 of them this holiday season, but said he could sell up to 400,000 if the economy were stronger.