Europe is traditionally slower into and out of a downturn than the US and this is being borne out at present, with improvements in Europe still much weaker than in the US (see
Stronger US, Weaker Europe Finds Merrill’s Ad Outlook). This weaker performance is dragging down the overall global growth figures.
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 |
