GroupM revised forecast shows U.K ad spending +1.5% in 2011, +3.3% in 2012
22 June, 2011
— Real household disposable income is presently the same as it was in 2008 thanks to wage deflation and the tax/benefit squeeze. This is set to get worse before it gets better, to the tune of £780 per household in 2011, according to Deloitte's current estimate: ‘the biggest drop since records began in 1955’. And that was before the latest rise in gas and electricity.
2011’s UK retail sales slowdown has put a brake on advertising, at least short-term. It has also put a brake on the economy as a whole. Even with minimal growth, 2011’s GDP will still only match 2006 in real terms. Measured advertising is the same as 1999 in real terms, and as a share of the economy - we expect about 0.8% - the lowest since 1971.
We now know the ad recovery amounted to 9% in 2010. We always expected 2011 would be fundamentally tougher, but have still had to reduce our previous (December) forecast from +3.6% to +1.5% now. The year has proved harder going, particularly in print, and there is a similar narrative coming out of the other big European economies. For the UK, we have three main hopes our new forecast may prove too low. First, that the bank rate stays put, given the Bank of England appears to have given up targeting inflation. Second, that retail, the second-largest ad category after finance, will bounce back in Q4 as it so often does. Third, that government advertising, depressed to eighth, will return to growth having ‘reset’ with the new fiscal year.
Our first prediction for 2012 is 3.3% growth. It is just possible that wage settlements might edge ahead of inflation in 2012, but more certainly 2012 is a ‘maxi-quadrennial’ providing an Olympic and Euro football updraught, though this is hard to isolate or quantify. Most usefully, the advertising cycle follows wider corporate investment more closely than it does consumer spending, and the conditions and sentiment for investment remain more positive than those for consumers.
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