MERRILL LYNCH UPGRADES U.S. AD SPENDING FORECAST

Newspapers, Network TV Key Factors Cited in Latest Report

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NEW YORK (AdAge.com) -- One more advertising industry analyst upgraded ad spending forecasts for the year, but remained cautious about prospects for a recovery.

Lauren Rich Fine, first VP, Merrill Lynch & Co., upgraded her U.S. spending outlook to 0.4% growth, up from an earlier forecast of a 1.5% drop, and upgraded her global forecast to a decline of 1.3% from a 2.1% drop. Her forecast of a 2.6% drop in non-U.S. advertising remains unchanged.

The key factors for

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the U.S. upgrade are stronger-than-expected newspaper and network TV spending, according to Merrill's analysis.

Newspapers will likely stay flat -- up only 0.1% -- instead of declining 1.7% as initially forecast, while network TV will grow 4.5%, instead of falling 5%. Radio will grow 4.6%, instead of 2%, and magazine advertising will decline 2%, less than the 3% fall initially forecast.

"We do believe a recovery is brewing, but it is percolating slowly," said Ms. Fine in today's report.

She noted this recovery depends on corporate spending and profitability, not consumer spending, as in recessions past. This means the recovery will be "reasonably tepid" while corporate profits remain weak.

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