Forecasters See Advertising Rebound Next Year

By: Seth Sutel, AP Business Writer (AP) Two leading forecasters predicted a mild rebound in advertising spending for 2002 Monday, saying the Winter Olympic Games and congressional elections should help pull the industry out of a slump.

The growth would not be enough to bring spending back to the boom levels of 2000, "but it will start the gradual crawl back," said one of the forecasters, Robert Coen of Universal McCann.

Coen now expects a 2.4% increase in all U.S. advertising spending next year, a small but measurable rebound from the 4.1% contraction that is expected to occur this year. He released his forecast at a media industry conference presented by investment bank UBS Warburg.

The 2001 shrinkage would be the first yearly pullback in U.S. advertising spending since 1991, according to Coen's calculations, and well off the 9.6% growth seen in 2000, when dot-com spending and the economic boom were in full swing.

Coen said he expected the U.S. economy to start moving back upward in the first quarter of next year as a series of interest rate cuts by the Federal Reserve and other government economic stimulus measures take hold.

That should put advertising on track to recover soon thereafter, Coen said. "Advertising usually lags behind the economy, and people are still cutting now because of decisions made six months ago. The Olympics will start to turn things around, but it's like a tugboat turning around a big ship," Coen said.

The Salt Lake City Games will take place Feb. 8-24.

Overseas advertising markets, which have also been hurt this year, are expected to have a mild turnaround as well, according to a separate forecast by Zenith Optimedia, which was also released at the UBS Warburg conference.

After an anticipated decline of 3.4% this year, Zenith Optimedia now expects global advertising to edge up 0.8% in 2002 and 3.6% in 2003 as the global economy recovers.

"We think we've now hit the bottom of this particular cycle," John Perriss, chief executive of the London-based advertising company, said in his presentation. "We can look forward to better times, but at the back end of 2002 going into 2003."

Separately, two researchers covering the newspaper industry also forecast some improvement in the outlook for advertising spending next year.

Miles Groves, chief economist of The Barry Group, a Bethesda, Md.-based newspaper consulting company, said he expects 2.3% growth in newspaper advertising spending next year, compared to a contraction of 7.7% for 2001.

"We expect this will be a short recession, and that we'll be feeling a lot better about ourselves by the end of the first quarter," Groves told the industry conference.

Speaking at the same presentation as Groves, Jim Conaghan, vice president of market and business analysis for the Newspaper Association of America, said he expected newspaper advertising to pick up 0.6% next year, based on 1% growth in retail and national advertising and little to no change in classified advertising.

Conaghan said he was basing his forecasts on several assumptions, including the implementation of an effective economic stimulus package, military success in central Asia, and a gradual rebuilding of consumer confidence.

The NAA also reported Monday that, according to preliminary estimates, newspaper advertising spending fell 10.3% in the third quarter compared to the same period a year ago. Last year, third-quarter spending rose 4.3% compared with the year before that.