Top Broker Trims Advertising Forecasts, Blames Local Ads
Weak local markets and waning optimism regarding the extent of the recovery have induced Merrill Lynch to lower its advertising predictions for 2003 and 2004. Newspaper advertising has not bounced back as quickly as hoped and radio revenue forecasts have also been cut to reflect shifting demand.
Analysts have also seen fit to amend their US growth forecast for 2004, cutting their estimate from 5.7% (see Merrill Lynch Tweaks Advertising Forecasts) to 5.4%. Political and Olympics advertising is expected to account for $1.5 billion, without which the underlying growth rate is 4.8%. This is close to Merrill’s nominal GDP forecast of 4.7% and at this stage of the economic revival, advertising should grow in line with the value of goods and services.
It is acknowledged that local advertising is less vibrant than national advertising. This is attributed to the fact that national advertisers tend to base their ad budgets on macroeconomic indicators and are willing to increase spending when an improvement in trading conditions is predicted. By contrast, local advertisers are more inclined to wait for clear evidence in order to get a return on investment. Given the uncertain state of the economy, many have chosen to remain cautious this year.
The newspaper industry ad revenue forecasts for 2003 and 2004 has been reduced by 0.5% in both cases to 2% and 4% respectively. This is largely the result of underwhelming retail ad sales and press continues to trail other categories in the recovery stakes.
TV and cable predictions are unchanged but broadcast analysts have lowered the 2003 spot radio forecast from 2.8% to 2.5%. However, they still envisage growth of more than 8% in this sector next year.
Outside the US, Merrill is forecasting growth of 0.8% this year and 3.8% in 2004 while global growth estimates have been cut from 2% to 1.9% for 2003 and from 4.9% to 4.7% for next year.
| Merrill Lynch Advertising Forecasts | ||||
| 2001 | 2002 | 2003 | 2004 | |
| Total US | -6.3 | 2.5 | 2.8 | 5.4 |
| Total US exc. Direct mail | -7.7 | 2.4 | 3.0 | 5.7 |
| Newspaper | -9.4 | -0.5 | 2.0 | 4.0 |
| Broadcast Television | -13.2 | 8.2 | 2.8 | 6.8 |
| TV Networks | -10.0 | 4.9 | 7.7 | 8.0 |
| TV Stations | -16.8 | 11.9 | -0.9 | 6.2 |
| Cable | 1.8 | 3.6 | 9.5 | 8.8 |
| Radio | -7.5 | 5.7 | 2.4 | 8.2 |
| Magazine | -7.5 | -3.5 | 3.0 | 5.0 |
| Internet | -11.6 | -5.0 | 5.0 | 10.0 |
| Non-US | -8.6 | 0.5 | 0.8 | 3.8 |
| Global | -8.2 | 1.4 | 1.9 | 4.7 |
| Source: Merrill Lynch, October 2003 | ||||
