Recent studies show consumers were cutting back their spending-which accounts for two-thirds of U.S. economic activity-long before the current crisis started, and that consumer confidence has flagged for months due to rising unemployment.
"A lot of people are clinging to the hope that a quick war will solve all the problems, but that's an unrealistic hope," said Richard Milliman, VP in the CRM practice and global leader of the Loyalty Factory, a unit of consultant Cap Gemini Ernst & Young.
No historical precedent exists to show that quick recovery immediately follows a war, Mr. Milliman said. That would require an upswing in corporate spending and an improvement in the labor market, he said.
Richard Bernstein, Merrill Lynch & Co. chief U.S. strategist, puts a risk of a double dip at 50%, warning: "There's more to geopolitics than Iraq."
In a note to investors, Merrill's chief North American economist, David Rosenberg, warned that firms are still downsizing to improve earnings, not because of the war. "It's called a post-bubble workout, and as we saw in the 1991-93 period, the convalescence can last years," he said.
The biggest concern for consumers is rising unemployment, not the war, added J. Walker Smith, president of Yankelovich Partners. A quick victory won't lift consumer anxiety about the job situation, he said.
Even as they planned war contingencies, marketers agreed the economic weakness had affected their budgets before war was a concern. In a recent survey of media buyers by InsightExpress, 55% said the war is affecting media budgets negatively, but 52% also said the economy has had the same effect.
War's end will take the edge off uncertainty in media planning, but marketers warn it won't unleash an upsurge in ad spending.
"I'm not sure there will be pent-up demand as much as spending the media budget you'd already set for the year," said Deborah Coughlin, senior VP-global brand building at MasterCard International.
Those media budgets have been depressed since 2001. InsightExpress found 55% of media buyers said budgets will stay the same or decrease this year compared to 2002.
"Some budgets will recover-for those advertisers who are not as seasonal-but some will be lost," said John Rash, senior VP-director of broadcast negotiations at Interpublic Group of Cos.' Campbell Mithun, Minneapolis.
Mr. Rash speculated advertisers in categories considered more recession-proof, such as package goods, will reschedule canceled ads, as will marketers with time-sensitive promotions, including movie studios and automakers. Categories like financial services and technology are going to need "economic injection" before they pump up ad dollars, he said.
"If the war is over quickly, we're going to go back to where we were before-which is depressed," Mr. Milliman said. "If people were holding out for [a return to the conditions of] 1999, it's not going to happen."