Sure it will be affected. people will spend less money on the web, including hosting their websites, and domain names.
Not actually. People buy less, companies reduce prices. Therefore companies also reduce headcount or reduce the salaries of workers and hence people will have less money to buy. It is a vicious cycle.
It could work both ways. As said above, it could affect the industry because people aren't simply in mood to spend or expand, and want to keep costs low. On the other hand, losing jobs in the offline world will bring many people to the online world as they try to keep their homes afloat, and that could result in an increase in business.
But all the money needs to come from offline.. the internet cant fully be alive money wise without people advertising offline businesses. but who knows for sure.. either way it will be effected as i dont see prices coming down on anything web based anytime soon.. seems domains get more and more expensive every damn day.
As somebody already suggested, it is a vicious cycle and just like every other segment of the industry, hosting would also be affected and prices would slash further.... Prices are everywhere determined by demand and supply....Since there was lot of demands in the past years, huge capacity addition took place..and now with demand destruction, prices will only fall further!!!