4.8% increase in ad spending is projected

Rise would reverse last year's slump

August 06, 2002|By BLOOMBERG NEWS

NEW YORK -U.S. advertising spending will rise 4.8 percent to $610 billion this year, reversing last year's slump when the U.S. economy entered a recession, according to investment bank Veronis Suhler Stevenson.

From last year to 2006, ad spending will grow at a compound annual rate of 5.5 percent, reaching $760 billion, New York-based Veronis Suhler predicted in its 16th annual communications-industry forecast covering broadcast, cable and satellite television, radio, Internet, film, music, publishing, direct mail, public relations and billboard advertising businesses.

Ad spending will recover from last year's decline and a "malaise" in the first two quarters of this year as the economy improves, investor confidence returns and interest rates remain low, the study forecast.

The growth rate of communications industry spending is expected to slightly outpace the growth in the U.S. gross domestic product, which is projected to be 5.4 percent from last year to 2006, the study said.

"We already see in advertising that there are some positive signs," Veronis Suhler research director Leo Kivijarv said in an interview. "TV, for example, had a strong upfront [ad sales market]. And other media, while they're haven't come out of negative growth, are reporting that they are showing improvements from last year."

U.S. ad spending will rise 6 percent to $645 billion next year, Kivijarv predicted. Last year, ad spending slipped 0.3 percent to $580 billion, the only decline in the study's history, he said.

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