A grimmer outlook for U.S. ad spending

During first quarter ad spending got back on track following a disappointing fourth quarter, and many analysts expected that to set the tone for a better year.

Alas, it looks as though first quarter was little more than a false start.

The continued economic uncertainty and some disappointing second-quarter data has prompted one forecaster to revise its earlier outlook for 2012 ad spending downward.

Pivotal Research Group now predicts that ad spending will grow 1.4 percent this year, down from its earlier prediction of 2.3 percent.

Brian Wieser, senior research analyst at Pivotal Research, says the recovery is taking longer than he thought it would.

"It’s slower than I expected. The economy continues to face tremendous uncertainty and significant structural challenges," he tells Media Life.

"Ongoing innovation and the resulting improvements in efficiency that will result in further economic growth are circularly hampered by limited confidence in the overall economy."

Wieser revised his predictions following his discussions with media buyers and his analysis of company earnings during first and second quarters.

As he notes in the forecast, "What seemed an improving environment in first quarter now appears to have been a 'false dawn': second quarter turned out to be in line with trends observed during late 2011, growing by only 1.3 percent."

Those numbers were disappointing following greater growth in first quarter, and Wieser says it's unlikely the trend will reverse itself again in third quarter, despite strong political spending at the local level.

"National media was hurt a little more in this revision, primarily because we thought it was holding up more strongly than it was based on data we saw in the first quarter, and this trend faltered," Wieser says.

Indeed, while spot television grew more than expected during second quarter, up 9.8 percent over 2011 compared to Wieser's earlier forecast of 7.8 percent, national TV was weaker than expected.

Network TV was down, and cable did not grow as quickly as earlier in the year. Total spending in the category was up only 2 percent.

"While management teams identified various reasons to explain declines, the fact that budgets didn’t show up elsewhere indicates to us that the markets generally softened more in line with the trend we observed coming out of last year’s fourth quarter," says the forecast.

Wieser lowered his outlook for national TV growth this year from 4.8 percent to 3.1 percent.

The only thing that could help improve the outlook for advertising this year is a better outlook overall for the economy, and right now that seems unlikely.

"The latest forecasts around personal consumption expenditures (PCE) and industrial production (IP) were previously tepid, but per the Philadelphia Federal Reserve’s Survey of Professional Forecasters, consensus expectations among the country’s leading economists have come down for this year and next," Wieser says.
 

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