US adspend rising in 2006 but still below expectation

LONDON - US advertising will begin to improve this year with an increase of 5.6%, beating a sluggish gain of only 2.8% last year, but the figures are still below expectation, according to Universal McCann's forecasting guru Robert Coen.

The Interpublic-owned agency also said there would be a total worldwide ad gain of 5.8% to $602.4bn (£332bn), according to senior vice-president of Universal McCann Robert Coen's 'Insider Report'. 

In December last year, referring to the US ad economy, Coen said he expected better ad growth in 2006, and anticipated "uncertainty and cautiousness to moderate with ad growth moving closer into line with economic growth of 5.8%".

Coen, who has been analysing US adspend trends since 1948, now predicts a slightly lower growth in the US of 5.6%, but said that the winter Olympics and intense political contests for House of Representatives and Senate seats will produce extra ad outlays.

Advertising revenues in the US for 2005 were only up 2.8%, although predicted to be 4.6% above the 2004 total, as final fourth-quarter numbers turned out to be even more sluggish than assumed.

Coen said: "The pendulum should eventually turn back in the other directions but a sharp shift does not appear to be immediately likely.

"We expect some relative improvement in ad growth in 2006, but in 2007 the Olympic and election stimuli will be absent. The early resumption of across-the-board strong advertising growth is not likely to reappear soon."

Coen believes there are a number of possible explanations for the below-expectation growth of advertising during the present recovery, such as the fact that advertising spending has probably been highly over-expanded and, over the past few years, media prices have grown faster than general inflation.

This meant that marketers could not maintain their ad spending pace and corrections were inevitable.

In addition, developments in the automotive and pharmaceutical industries depressing ad demands and the growing number of discounters like Wal-Mart have caused most US packaged goods marketers to keep their products priced low while downgrading spend on advertising.

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