Newspaper Ad Economist Zigs As Others Zag Over '03 Outlook

A leading newspaper economist has revised his predictions for newspaper ad spending downward for 2003, citing the lack of recovery in employment and other economic factors. Miles Groves, former economist at the Newspaper Association of America and now president of MG Strategic Research Ltd., said the newspaper ad spending will grown only 3% to $45.4 billion in 2003, led by an 8.5% increase in national ads and a 3.4% rise in retail. But classified, which continues to be dampened by the jobless recovery, will be up only slightly.

If recruitment advertising hadn't been included in the total, classified would be up 2.5% because of the strength in automotive and real estate, he said.

Groves cited a number of extenuating factors for his downward revision, including the weak job market, the spiraling costs of the war in Iraq and the specter of terrorism. Rising pools of public and private debt are also a big concern.

"We don't really know what's going to happen in Iraq," Groves said. "We don't know the end game with the UN and what that's going to cost, which leads to the debt and the pool of resources. We're getting to the point where the [federal] debt is going to be a large piece of GDP and it's not a productive part," Groves said.

A jump in productivity and the fact that jobs aren't coming back like economists normally see following a recession is the new reality. Groves isn't optimistic that things are going to turn around anytime soon, despite political pronouncements.

"They're not coming back and we're 20 months into a recovery, and the world has changed. We don't all understand that," he said. Somewhere down the line, when the Baby Boomers retire and perhaps another industry catches fire like high tech did in the 1990s, employment will rise and classifieds with them.

Another report, by Edward J. Atorino of Blaylock & Partners, suggests that advertising revenues will continue to be sluggish through the rest of the year. The report said that fourth-quarter ad revenues should pick up but it wasn't clear whether it would be enough for newspaper companies to make up for higher costs. Atorino still predicted a stronger 2004, with more advertising and, in the case of companies with broadcast outlets, more revenue coming from the expected boost in political advertising.

At the same time, Groves thinks that a recovery will continue in 2004, with a 4.7% increase to $47.4 billion in total newspaper advertising, with a 5.5% increase in national, a 4.7% increase in retail and a 4.4% rise in retail

But he's more pessimistic about 2005, particularly for television, which won't have the expected boost in political and Olympic spending that is a certainty for 2004.

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