Robust ad spending growth forecast for U.S. next year

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Next year ad spending will post the strongest growth in four years, with ZenithOptimedia forecasting a 5% rise in U.S. ad expenditures and Merrill Lynch & Co. analysts looking for an even more optimistic 5.8% increase.

Global ad spending is forecast to come in just behind the U.S. at 4.7% growth in 2004, according to ZenithOptimedia, and 5% in Merrill Lynch's prediction.

In 2003, ad spending will increase 3% in the U.S. and 3.4% worldwide in major media, according to the semi-annual forecast ZenithOptimedia is releasing this week. Spending is edging back up after slight 2.1% growth in 2002 and the drastic 5.6% plunge in 2001 following huge 11.7% growth in 2000, according to Zenith figures.

"The underlying support for recovery is more significant, mainly because of corporate America's return to profitability," said Adam Smith, Optimedia's head of knowledge management. The U.S. will account for more than 45% of estimated global ad spending of $342.6 billion.

bigger gap

"We expect the gap between the U.S. and European economies to become more pronounced," Mr. Smith said. "Continental Europe is mired in uncompetitive [economic] conditions."

Continuing a long-term trend, TV's share of total ad spending will continue to increase while spending on newspaper advertising, the most troubled major media, keeps dropping. In 2004, Zenith expects TV's share of worldwide ad spending to grow by 0.6% and that of newspapers, whose share hasn't grown since 1989, to drop by 0.4%.

After falling for several years, ad spending in Japan, the world's second largest ad market, will grow by about 0.8% this year and 1.5% next year, Zenith said. European ad spending is forecast to grow a little faster, by 1.8% this year and 3.7% next year.

Merrill Lynch said that marketers are still cautious about spending.

"We believe that most advertisers are prepared to invest in resurrecting their top line growth but we have sensed a change in how ad/marketing budgets are being perceived internally; advertisers have expressed that the ad budgets are now another cost item vs. an investment in growth," Merrill Lynch analysts said in their report.

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