AD SPENDING TO INCREASE 6.5% IN 2005

Robert Coen Reports Marketers Are Responding to Economic Vigor

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NEW YORK (AdAge.com) -- With the U.S. economy on firm footing, American marketers are on track to spend a record $263 billion in advertising this year, according to a forecast presented at today's Advertising Outlook Report 2004 Midyear Update in Manhattan.

Robert Coen, director of forecasting for Interpublic Group of Cos.' Universal McCann, delivered the report this morning, and while today's figures represent a slight decrease from his December forecast, the tally continues to break records. (Each year, however, usually is a record-breaking year, with 1991 and 2001 the exceptions.)

Mr. Coen predicted $263 billion would go toward advertising this year, compared with his December projection of $266.4 billion. The new figure still represents a 7% increase over 2003, when advertisers spent $245.5 billion, a 3.6% jump over the previous year.

6.5% 2005 increase
And domestic ad spending in 2005 will continue to increase, to $280 billion, up 6.5% from this year.

"Final reports for the last quarter of 2003 indicated that the expected strong surge in U.S. advertising activity did not really show up until the opening months of this year. But the improved U.S. ad trends are now firmly in place," he wrote in his report.

Mr. Coen attributed this year's increases to advertising related to political election campaigns, the Summer Olympics and a rebounding economy. He said part of the reason advertising spending would continue to increase was because marketers who have been holding back even as the economy has been improving can no longer do so as competitors increase their marketing outlays.

Outpace general economy
He said the growth of the advertising industry has been trailing that of the general economy for some years but that in 2005 that growth would outpace the general economy. The change in advertising spending as a percentage of the gross domestic product has continued to climb since bottoming out in 2001, Mr. Coen said.

Overseas, Mr. Coen predicted a 4.8% advertising jump to $256 billion for this year and a 5.5% jump next year to $270 billion.

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