Merrill Lynch has today announced that it is revising down its 2004 and 2005 US advertising forecast to 6.5% and 5.2% respectively, due to increased pressure being put on advertising agency margins.
Despite slightly tweaking down the targets in the US, the global advertising forecast remains unchanged for this year at 5.5%, with 2005 sliding slightly to 4.9% from 5.0%.
Merrill Lynch said: “US agency margins remain under pressure as incentive compensation accruals are being rebuilt. We expect some relief in the second half but more specifically towards the fourth quarter as incentive performance bonuses could aid results.”
European forecasts are unchanged for the moment as this market appears to be beginning to show signs of recovery, says Merrill Lynch. The report adds that overall the business environment seems to be improving in Europe, with recovery also broadening to marketing services.
Newspaper forecasts have also been lowered for 2004 from 5.3% to 5%, as has radio which has been revised downwards from 5.6% for 2004 and 2005 to 3.8% and 5.0% respectively.
On a more positive note, the forecast for broadcast television has been revised upwards for this year to 7.2% from 6.6% but by 2005 this sector is also expected to slow and as a result, Merrill Lynch has decreased the target from 1.6% to 0.5%.
In summary, Merrill Lynch said: “Overall, we remain upbeat on the ad/marketing services sector. We understand the view among investors that US ad expenditures could decelerate next year due to difficult comparisons created by political events and the Olympics this year but we note that European ad trends should start to improve at that point. Further, the holding companies do not benefit from political events and will not have that difficult comparison.”
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