The economy's unexpected surge in the first quarter-some analysts estimate gross domestic product grew as much as 6%-belies some very jittery consumers, who could turn off the spending tap that has kept the recovery flowing.
"The combination of rising [interest] rates, rising energy prices and resulting weakening wage growth doesn't appear to be good news for the consumer," said Richard Bernstein, chief economist at Merrill Lynch & Co., one of the few Wall Street analysts warning that tensions in the Middle East-causing a rise in oil prices-could lead to a "double-dip" back into recession.
"Consumers are very confused," said Lynn Greenberg, owner of independent research firm Lynn Greenberg Associates. She noted a survey by the Qualitative Research Consultants Association in February and March found consumers are being more conservative on large purchases even as the consumer confidence index continues to rise.
Ms. Greenberg and others at the Advertising Research Foundation's annual conference last week in New York were scratching their heads about this two-faced consumer. They concluded 0% financing and discounts were stronger than fear of layoffs.
Media companies are wary. Many magazine executives expect ad pages to grow in the second quarter, but most forecasts are colored by the fragile look of the recovery. (See story, P. 12.)
"While we're seeing modest signs of economic recovery, corporate profits and ad spending are not yet participating," said Rich Zannino, chief financial officer of Dow Jones & Co. Ad revenue is running below initial expectations, which should leave 2002 revenue down in the mid-single digit range, he said.
First-quarter earnings, excluding special items, fell 53.2% to $6.8 million and revenue was down 14.6% to $392.9 million. Ad linage at the flagship Wall Street Journal fell 26.2% for the first quarter. Management said linage for the second quarter is expected to drop 10% to 20%; it said ad revenues should improve in the second half, helped by the paper's recent redesign.
For NBC, the Winter Olympic Games made the difference between a winning quarter and a losing one, according to the quarterly earnings report by parent General Electric Co. NBC added $700 million in revenue from the games, which helped the network post $2 billion in revenue, a 48% increase over the first quarter of 2001. Operating profit was $313 million, 5% above the same period in 2001. Without the Olympics, NBC revenue would have been down about 5% and operating profits flat, said Keith Sherin, GE's chief financial officer.
Companies reporting this week:
April 15: New York Times Co., Pfizer,
April 16: Coca-Cola Co., Gannett Co., General Motors Corp.
April 17: Ford Motor Co., IBM Corp., Philip Morris Cos.
April 18: American Express Co., McDonald's Corp., Microsoft Corp., Sears, Roebuck & Co.,
April 19: Tribune Co., Washington Post Co.