Group Press Releases
2004 Global Adspend Progress Ahead of Expectations with European Growth Boosting the Trend
05 January 2005
January 2005 forecast – year on year % growth at current prices
| 2004 | 2005 | |
| Global | 6.0% (5.7%*) | 4.9% ( 5.0%*) |
| USA | 5.8% (5.8%*) | 4.5% (4.8%*) |
| Asia Pacific | 6.2% (6.2%*) | 5.8% ( 5.8%*) |
| Europe | 4.8% (4.4%*) | 4.4% ( 4.4%*) |
| UK | 6.4% (4.6%*) | 4.6% (4.3%*) |
| Germany | -1.0% (-1.0%*) | 1.3% (1.3%*) |
| France | 3.0% (3.2%*) | 2.2% (1.9%*) |
| Italy | 6.5% (5.7%*) | 3.3% (3.3%*) |
| Spain | 5.0% (4.0%*) | 4.5% (4.2%*) |
*Figures in brackets represent the previous forecast issued in September 2004
Doug Flynn CEO of Aegis Group plc, Carat’s parent company, said:
“2004 ended with a better than expected 6% growth in global adspend helped by the continued recovery in the European markets. The one-off impact of the Quadrennial Effect - additional spend generated by major sports and political events - provided a fillip to global adspend in 2004 and we see 2005 growth settling at 4.9% with advertisers’ confidence stable and the market looking firm.”
GLOBAL OVERVIEW
Carat expects the upturn in global advertising expenditure to reach 6% for 2004. This is slightly higher than its September forecast of 5.7% growth. The upward revision is mainly attributable to the European recovery, which is accelerating in a number of countries. The robust growth predicted in the USA and Asia-Pacific is now confirmed.
The global recovery is now solid, with good macro-economic drivers. The consensus is that the world economy should achieve over 4% GDP growth in 2004. Economic growth slowed in the second half of the year, but advertising remained largely unaffected, and growth rates are back to the pre-recession levels of 1999.
Carat’s forecast for 2005 global advertising expenditure growth is 4.9%, broadly in line with its September forecast of 5.0% growth. Potential causes for concern in 2005 relate to the price of oil, the weakness of the dollar and the US current account deficit but so far the market outlook remains healthy. Carat has no indication of advertisers significantly cutting down on their media expenditure.
Advertising expenditure year on year % growth at current prices
The strong rise in internet advertising is continuing; growth is predicted to reach around 20% in 2004 and 2005. The internet’s share of global adspend is currently 3%, but this is expected to increase substantially in the next few years as the medium becomes an essential part of the marketers’ armoury.
The outdoor sector continues to perform very steadily; the consolidation of the industry and emergence of new formats are driving the medium’s growth. Outdoor is least impacted by the fragmentation of media and the move towards digital delivery should boost the sector. We anticipate that the strongest area of competition in the next few years will be the growth of in-store digital delivery.
REGIONAL REVIEWS
USA: Strong 2004, steady 2005
• Economic outlook still in the direction of slowing growth and fewer job gains
• Third quarter improved with a 3.7% GDP increase, but consumer confidence declined in November for the 4th consecutive month; corporate profits were softer in the 3rd quarter
• More positive, personal consumption increased by 5.1% in the third quarter
In terms of advertising expenditure, most media segments enjoyed a good year, with five out of 16 measured media experiencing double-digit growth during the first nine months of 2004. Advertisers’ budgets continue to rise, and only two of the top 10 categories saw a decline in 2004 (restaurants and hotels, department stores). Advertisers remain committed to broadcast television and there has been strong demand across all categories with record-level spending across all broadcast outlets and not much discounting.
Political spending (estimated spending $1.6bn) boosted national spot television, which is expected to increase by 8% in 2004. Key spot TV advertisers continue to spend and hold the marketplace, with the biggest categories being automotive, entertainment and retail. For 2005, TV owners remain optimistic, but without political advertising and with cable continuing to pick up share, stations will negotiate harder for business. Stations are not discounting per se, but are willing to run added value and bonus weight to hold on to business and increase shares.
Outdoor continues its steady growth, pushed by political and sport advertising and is expected to grow by 5% in 2004. Newspapers are expected to grow by 6.4% in 2004, led by a resurgence of automotive spending and continued strong spending by wireless communications. Internet spending remains buoyant, boosted not only by new advertisers, but also by existing advertisers increasing their spend.
Europe – Growth rates almost back to pre-recession levels
The trend is still led by the UK, Italy and Spain. The Nordics are also showing a return to good growth. France had a very good first half of the year, with a softer second half. The German market remains fragile, but the outlook for 2005 suggests a return to growth.
UK
• UK GDP now predicted to grow by 3.2% in 2004 and 2.8% in 2005
• Consumer spending is expected to slow from 3.1% growth in 2004 to 2% in 2005
• Housing market will remain soft in 2005, with very little or no growth
• Business investment remains healthy – at 5.9% higher than during the first nine months of 2003
Marketing budgets were revised up in Q3 for the fourth consecutive quarter. Rising profits and robust business sentiment has encouraged advertisers to further boost their expenditure in each of the first three quarters of 2004. This recent period of upward revision is the longest continual period of improvement since the beginning of 2000. Television grew particularly fast in the second half of the year (+5.9% forecast for the year), together with online advertising; outdoor slowed a little with a quiet fourth quarter (+7% forecast for the full year).
Germany
• Strength gained in Q1 2004 lost momentum in Q3, due to declining exports
• GDP now expected to grow by about 1% in 2004, but should gather pace in 2005, when tax reforms and improved job market will help boost private consumption
• Budget deficit will reach 3.8% of GDP in 2004 - violating EU Stability Pact for the 4th consecutive year
The sluggish economy and lack of private consumption are still weighing on the advertising market, with the prospect of a return to growth pushed back to 2005. The main driver of spend in 2004 was the retail sector, and particularly food discounters. The TV sector created growth at ratecard costs, but with very little ‘real money’ behind it. Outdoor continued to grow, but at a moderate pace. Online remains the fastest growing sector.
France
• GDP growth for 2004 is expected to be around 2.4%
• After a strong growth in the first half of the year, private consumption has slowed
• Corporate investment continues to rise at a rate of 4% in the second half, but private investment in housing is weakening
• End 04 and early 05 should be softer, as a consequence of the newly introduced Inflation Control Law (large retailers and manufacturers have agreed a 2% decrease in prices by September 04, and a further 1% by January 05)
The advertising market experienced good growth in the first nine months of 2004 - +10.1% at ratecard costs - but an increase in discounts will minimize the trend of the net market for the full year. Television is still benefiting from the short term attitude of advertisers and is doing well. It is also boosted by the new regulations introduced at the beginning of 2004 allowing the press sector to advertise on television (advertising for publishing and distribution products has also been allowed, but only on cable and satellite television). Press continues to grow moderately and the restructured Outdoor industry is expected to recover this year.
Italy
• GDP is expected to grow by 1.3% in 2004 and 1.8% for the next two years
• Consumer Confidence is increasing, and is now almost back to late 2003 levels
• Italy is expected to continue recovering in 2005; internal demand is growing and the recovery of private consumption should sustain the trend
The advertising market continues to perform very well; the first half of 2004 was exceptionally good. The trend slowed down a little in the second half of the year, but the market is still expected to close at 6.5% growth. The main drivers of growth remain telecommunications, automotive, finance, retail and media. The good performance of television led to a decrease in discounts and overbooking – the medium finished 2004 at 8.3%
Spain
• Growth could be slowing a little - GDP is now expected to grow by 2.6% in 2004 and 2.8% in 2005
• Spain’s competitiveness is being affected by its inflation gap with the rest of the EU zone (3.1% vs 2.1%) and the recent increase in interest rates could slow private consumption
• On the positive side, the Spanish financial market, consumer investment and real estate industry continue to perform well
Advertising expenditure continues to grow; the second half of 2004 has been a little less buoyant than the first half, but the year should finish around 5% with big advertisers still increasing expenditure. Television (10%) and Internet (12%) remain the two fastest growing media; outdoor is the third fastest growing medium and cinema is the only medium to decrease.
Central and Eastern Europe
CEE countries showed strong growth in 2004, with most countries growing faster than their West European counterparts; the countries joining the EU in 2004 – especially Poland, Czech Republic and Baltics - did particularly well.
Japan
• Although the growth rate has cooled down in the second half of the year, the economy is still showing a stable growth with GDP expected to grow by 2% in 2004
• Business investment and consumer spending are increasing, but still slowly
• Private property prices are stable
Advertising expenditure forecast to grow by 2.2% in 2004, largely as a result of the Olympic Games. Spend is still expected to rise in 2005, but only marginally. The largest increase was in online spending, which has overtaken radio as the fourth biggest medium in terms of gross spending.
China
• The economy is boosted by increased government spending, strong exports, WTO and increased foreign investments and is expected to grow by over 8% in 2004 and 2005
• The regulatory measures adopted by the government to avoid overheating have not affected the confidence of foreign investors with a 13% increase in the number of foreign-funded companies approved in 2004
• Disposable income per capita is up by 7% over 2003, with spending per capita up by 6.5% in real terms
Advertising expenditure continues to grow strongly, boosted by foreign investment and to a lesser extent by this year’s sporting events. The government’s new TV regulations are boosting the medium significantly, but the increased cost of TV seems to be benefiting the press medium, with some advertisers shifting their spend. Online expenditure is growing the fastest, at 36% in 2004.
For further information contact:
Richard Walters
Aegis Group plc
+44 (0) 20 7070 7700
Caroline Leroi
Aegis Group plc
+44 (0) 20 7070 7746
Charles Palmer
Financial Dynamics
+44 (0) 20 7831 3113
