Business optimism is currently at its highest level for over three years and economic growth is expected to surge during 2004, providing a much needed boost to the UK advertising market.
The latest
BDO Business Trends Report forecasts that healthy domestic demand and an improving world climate will lift the UK’s economic growth to 2.3% in the first half of the year. The most recent estimates made in the third quarter put growth at 2.1% during 2003.
The survey, which was compiled from a series of recent business indicators, shows that business output and confidence in the economy is rising, despite fears that high consumer debt levels could constrain spending this year.
However, BDO Stoy Hayward, the accountancy and consultancy company behind the report, predicts that soft consumer activity over the Christmas period will persuade the Bank of England to keep interest rates on hold when it meets later this week.
Consumer activity over the festive period is likely to be key to the Bank’s decision and shopping numbers are thought to have been disappointing in the run up to Christmas. There are also concerns that record post-Christmas sales will not make up for the pre-holiday shortfall.
Peter Hemington, partner at BDO Stoy Hayward, said: “The fall in inflationary pressures combined with strong business output and optimism is very encouraging. But we need to watch out for consumer spending over the Christmas period. Unless it continues to moderate, we could well see another quarter point increase early next year.”
Douglas McWilliams, chief executive of the centre for economics and business research, added: “The latest poll of polls is a further indication of sustainable economic growth, which we predict will last well into 2004.”
The latest figures from the Advertising Association show that UK adspend remained subdued during the third quarter of 2003, inching up by a nominal 0.2% as the difficult economic conditions continued to weigh on the market (see UK Advertising Shows Real Terms Decline In Q3).
However, the latest forecast from ZenithOptimedia suggests that 2004 will be more positive with the UK’s major media spend expected to rise by 3.2% in current currency terms, following a 1.1% rise in 2003 on the same basis this year (see Conditions Are Firming For Ad Recovery, Says ZenithOptimedia).
