Merrill lynch has revealed US advertising expenditure is expected to trail nominal growth in the US gross domestic product (GDP), projecting adspend to rise by 4.2% this year, excluding direct mail.
According to Merrill analyst, Lauren Rich Fine, the soft advertising economy is attributed to a “variety of factors”, including a low rate of economy inflation, which has capped the overall increase in advertising budgets.
Commenting on the forecasts, Fine said: “Expectations are justifiably low, but fourth quarter 2005 is shaping up a bit better as some funds were shifted from the third quarter into the fourth quarter, there are some improvements in radio and television trends, and looking ahead the Olympics, elections and World Cup should all help 2006.”
Estimates released earlier this year from Merrill predicted US adspend growth of almost 6% in 2006, buoyed by spend related to the World Cup (see Merrill Revises 2005 Ad Growth Forecasts Downwards).
These predictions are echoed by media agency Carat, who also expect next years football events to boost advertising expenditure, forecasting global growth of 5.8%.
Earlier this year, Bob Coen, senior vice president and director of forecasting for Universal McCann also projected a positive 2006 for advertisers, predicting the industry in the US to match or outpace GDP growth (see McCann Revises 2005 Adspend Estimates).
Explaining his reasons for a more upbeat market in 2006, Coen told INSIGHT: “I think we’re in a cautious hold, wait and see type of pattern that has been going on longer than it should. The main reason why I’m talking myself into more optimism is – it’s going to end soon. It can’t rain forever!”.
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