Merrill Lynch Forecasts: “Potential For Continued Investment in Advertising”

Merrill Lynch have released updated European advertising forecasts, which put the UK at +6.7% this year, falling to +3.9% in 2011, but up a healthy 7% in Olympic year.

On a broader European scale, Merrill comment: “Our core thesis at the start of 2010 that advertising could recover strongly even in a low GDP growth environment (as advertisers switched their focus from cost savings to top line growth) has played out well with stronger than expected European advertising growth.”

Merrill believe there is “scope for further gains,” and expect 5% European ad growth in 2010, but have trimmed their 2010-2014 forecast from 5.3% to 4.6% “to reflect lower consumption, with our Spanish forecasts hardest hit” (where it will take longer for advertising intensity to recover given lower consumption per capita).

However there is much optimism to be taken from their notes:

“Typically it takes five years for advertising to recover relative to GDP, and while government and consumer spending is likely to remain weak in most geographies, corporate margins are at record levels and balance sheets are strong, highlighting the potential for continued investment in advertising to stimulate demand and maintain/increase share in a low growth environment.”

In the UK, Merrill take a mixed view:

“We have also trimmed our 2010 UK advertising growth forecast to reflect lower print growth, trimmed 2011 to reflect the January VAT increase, fiscal tightening and a tougher comp following a bigger than expected World Cup uplift. However, we have upgraded our 2012 growth to reflect the benefit of the London Olympics.”

Looking by medium, Merrill expect print to continue to “bear the brunt of online gains, and TV to see more modest share losses to new online, particularly online video and social networks, and also mobile. We expect outdoor to maintain/grow its share as it benefits from the fragmentation of in-home media, digital innovations and also potential consolidation benefits.”