Global advertising growth is forecast to outpace the world economy in 2012, due to the U.S. Presidential election and the London Olympics, although expectations have slipped in recent months.
According to new forecasts by three major media service agencies, the euro zone debt crisis and the impact it is having on business confidence will undermine budgets next year, lowering ad spending forecasts.
ZenithOptimedia predicted the global advertising market will rise by 3.5 percent in 2011 and by 4.7 percent in 2012, down from a forecast in October of 3.6 percent growth in 2011 and 5.3 percent in 2012.
A second agency, Magnaglobal, forecast 5 percent growth worldwide for 2012, while a third, GroupM, came in the strongest with a call for 6.4 percent growth next year.
GroupM Futures Director Adam Smith, speaking at a UBS investor conference in New York, attributed the jump to the quadrennial effect, when the U.S. elections, European football championships and Olympics all fall in the same year. He said that was worth about 1 percent of extra growth in 2012.
All three agencies also cited the rebound in ad spending in Japan as it recovers from the huge earthquake in March.
The global ad market is therefore remarkably strong at a time when the eurozone threatens to fall back into recession and
drag down the growth of its trading partners, ZenithOptimedia said in releasing its outlook.
ZenithOptimedia also said that unlike the downturn in 2008, companies have cash available to spend and are prepared to use it to grow market share.
In general, advertisers have built up large cash reserves and -- thanks to exceptionally loose monetary policy in the developed world -- are earning very little interest on this cash.
According to a Reuters poll in October, economists expect global GDP to grow by 3.8 percent in 2011 and by 3.6 percent in 2012.
Zenith expects Western Europe to grow by just 2 percent in 2012 even though the London Olympics and the soccer championships will lift spending. North America was described as looking 'decidedly healthier, with U.S. spending forecast to rise by 3.5 percent.
GroupM put U.S. spending growth at closer to 4 percent, meaning it should reach $153 billion.
ZenithOptimedia is owned by French advertising group Publicis
(Reporting by Kate Holton in London and Paul Thomasch in New York; Editing by David Cowell and Derek Caney)