European demand for consumer electronics is softening in the second quarter, according to Dutch manufacturer, Philips Electronics.
"Economic indicators around the world point to reduced growth rates," the company said. "Europe, in particular, is suffering from a weakened consumer retail environment in the second quarter, hampering our growth ambitions in the short term."
The warning comes after Philips saw its first-quarter profit plummet 79 per cent, due partly to a loss in the group's flat-screen joint venture.
Although Philips president and CEO, Gerard Kleisterlee, told analysts they shouldn't expect a catastrophe, he conceded the retail environment in Europe was extremely poor.
Several European markets, in particular Germany, are battling a huge slump in consumer spending due in part to high and, some cases, still rising unemployment.
Philips is Europe's largest producer of consumer electronics and one of its biggest manufacturers of semiconductors.