Analysts at Merrill Lynch have slightly downgraded their global advertising forecasts for 2003 from 3.0% to 2.7%, due to tougher than expected comparisons with 2002, a deterioration of the European economy and a tentative start to this year.
In addition, a stronger than expected close to 2002 spending means that the year on year comparisons moving towards the end of 2003 will show a lower relative growth than previously anticipated.
The threat of war with Iraq is contributing further to a sense of uncertainty and hesitancy amongst the media and advertising sectors, although Merrill Lynch has not explicitly factored this into the forecasts (although they are ‘negatively biased’ as a result of these conditions).
The broker has also downgraded its 2003 US forecasts by 0.3% points from 4.0% to 3.7%. For 2004, US growth is forecast to be 6.0%, with global growth up by 5.0%. Analysts say that these forecasts may be optimistic, but argue that there is a “pent-up advertising demand once the uncertainty lifts.”
Should the US forecasts prove correct they would represent a 2003 performance which is in line with GDP growth, followed by a slight outperformance of GDP in 2004. In the last two years US advertising has underperformed the GDP growth rate, a fairly typical occurrence in an advertising recession.
US Advertising Forecasts | ||||
2001 | 2002 | 2003 | 2004 | |
Total US | -6.3 | 1.8 | 3.5 | 5.7 |
Total US exc. direct mail | -7.8 | 1.6 | 3.7 | 6.0 |
Newspaper | -9.4 | -0.5 | 3.5 | 5.1 |
Broadcast television | -13.2 | 7.6 | 3.0 | 7.2 |
TV networks | -10.0 | 7.0 | 6.5 | 7.0 |
TV stations | -16.8 | 8.9 | 0.1 | 7.6 |
Cable | 0.5 | 2.9 | 6.3 | 7.8 |
Radio | -7.5 | 6.0 | 5.3 | 7.6 |
Magazine | -7.5 | -3.5 | 3.0 | 5.0 |
Internet | -11.6 | -5.0 | 5.0 | 10.0 |
Non-US | -8.6 | 0.5 | 1.7 | 3.9 |
Global | -8.2 | 1.0 | 2.7 | 5.0 |
Source: Merrill Lynch, February 2003 |