• by September 6, 2005

EXTREME WEATHER, ROSY FORECAST -- As tragic as they are in terms of their human toll, natural disasters such as Hurricane Katrina and last year's Asian tsunami apparently do not appear to have negatively impacted the advertising business the way many might have expected they would. At least that's what the media economists at Carat seem to suggest in their revised U.S. and worldwide ad spending growth estimates. The new forecast, released Tuesday morning, was the first to come out in the aftermath of Hurricane Katrina, and it does not appear to have swayed the media agency's outlook. In fact, the report, which predicts U.S. ad spending will rise 4.5 percent in 2005 and 5.0 percent in 2006 - the same as the agency's earlier forecast - doesn't even mention Katrina as one of the factors influencing the U.S. economy.

While the report concedes the U.S. economy is "sending contradictory signals," it cites the relatively soft growth in GDP and consumer confidence, as the primary mitigating factors, which have been offset by the fact that employment and consumer spending remain strong. "Our 2005 forecast remains unchanged with growth at 4.5 percent," the report concludes.

As for the effects of the Asian tsunami, Carat now pegs Asia to be the fastest growing advertising market in the world, and actually predicts it will overtake European ad spending by 2008.

In fact, a year after the natural disaster, Carat says ad spending is projected to rise 14 percent in affected markets such as India and Indonesia.

While the media agency doesn't draw any corollaries between the disasters and the advertising economies of the markets they impacted, it doesn't seem they warranted a footnote either. That's in stark contrast to man-made disasters like the Sept. 11 terrorist attacks, or the London bombings, which appear to have had profound impact on the advertising scene. Carat doesn't actually link it directly to the bombings, but it is noteworthy that U.K. ad spending received the biggest downgrade in its revised outlook, falling to a growth rate of 3.7 percent in 2005, down from 4.8 percent in its last forecast.

In an ironic way, Carat may even be suggesting that disasters - by displacing traditional media infrastructures required to produce and distribute traditional media like newspapers, magazines, TV, and even the U.S. mail - may actually be accelerating the growth of the kind of digital media the agency believes is driving the underlying growth in the advertising business. Deprived of access to some analog media, many victims of natural disasters turn to the Web and wireless media as the only dependable lifelines for vital information and communication.