Despite an advertising pick-up in recent weeks, particularly in UK and US television, the strong conditions are not likely to remain going into 2003, with recovery expected to be muted, according to Merrill Lynch.
The broker says that the UK’s ITV, whilst showing a strong viewing recovery during September, will nevertheless see its share of broadcast spend negotiated down during December as a result of broader audience declines during the course of the year (see
ITV Ad Revenue Monthly Forecasts From Merrill Lynch).
Interest rates could rise Analysts say that they still expect Q1 2003 to be fairly strong due to a comeback in travel and holiday advertising, but warn that after this media is at the mercy of consumer spending.
If interest rates were to rise, consumer spending in most western countries would fall as the ratio of personal debt to disposable income is at near record levels; this would force consumers to shift income from spend to debt financing. In 2001, consumers kept spending due to the very low interest rates, but if the rates were to take an upward turn, things may shift for the worse, warns Merrill Lynch.
Naturally, if consumer spending begins to fall, advertisers will rapidly curtail their own spend in fear that it would be wasted on an increasingly frugal audience.
The broker forecasts a muted zero to 2.0% recovery for most European-based advertising agencies and television broadcasters in 2003.
