Economy rises, ad rebound lags

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The U.S. economy grew in the fourth quarter and the Fed left interest rates alone. So the recession is over, right?

Not on Madison Avenue.

Neither Wall Street nor media CEOs are ready to call an end to hard times. The experts say corporations are not ready to spend and consumers tapped themselves out over the holidays, so advertising will stay weak until midyear.

Even if today's economy is later ruled to be on the rebound, the ad market lags. So far, no media company CEO wants to be the first one out of the storm shelter.

"The ad market continues in exactly the same position it was in before-it's not good," said Barry Diller, chairman-CEO of USA Networks.

Mr. Diller told reporters he anticipates an advertising turnaround in midyear, but added: "I see no indications of that at this stage. It's just no good."

Eisner's analysis

Walt Disney Co. Chairman-CEO Michael Eisner told analysts, "We expect the worst is behind us." But he said Disney, parent of ABC, does not expect solid growth until the latter part of the year.

Robert Pittman, AOL Time Warner's co-chief operating officer, waxed philosophical: "The final silver lining, which lets us sleep at night, is [that] advertising recessions always end."

There are signs of improvement in the economy. At its Jan. 30 meeting, the Federal Reserve Board left interest rates unchanged for the first time in a year, but warned the economy remains weak.

Also on Jan. 30, the U.S. Commerce Department announced gross domestic product showed a surprise gain of 0.2% in the fourth quarter, vs. the 1.3% third-quarter drop. The next day, the Conference Board announced its help-wanted index showed an increase in December, its first in 12 months.

Recovery talk is tempered by weakness in manufacturing and employment. UBS Warburg economist Maury Harris forecast "a mild recovery, restrained by paltry pent-up demand, rising household saving, sparse investment and paltry sales abroad."

Most Wall Street economists predict a mild 2% to 2.5% GDP growth rate for the first quarter.

Merrill Lynch & Co. chief economist Bruce Steinberg forecast a strong recovery won't come until the second half.

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