Wall Street To Madison Avenue: You're Back On 'Historic' Track

Proclaiming that "advertising appears to be back on its historic trend line," the highly regarded equities research team at a top Wall Street securities firm Monday upgraded its outlook for U.S. and worldwide ad spending in 2004 and 2004. The upward revision by the team, led by Merrill Lynch research analyst Lauren Rich Fine, is the latest in a series of progressively improving forecasts for the advertising economy, which the firm expects will turn in its best year since 2000, a so-called Olympics/elections quadrennial year like 2004, that also preceded the dot-com bust.

While 2004 won't achieve the 11.3 percent rate of growth achieved by the U.S. ad industry in 2000, the Merrill Lynch researchers nonetheless expect it to grow at rates that are much more consistent with historical patterns that tend to match the expansion of the U.S. economy. In 2004, the securities firm expects U.S. ad spending to grow 6.6 percent, an improvement of more than half a point from the 6.0 percent rate of growth it previously predicted. Worldwide ad spending is now expected to grow 5.5 percent, indicating the U.S. will continue to grow its share of global ad spending.



Despite the healthy rate of expansion, the Wall Street analysts said they nonetheless are disappointed that "in a year with strong political spending and a Summer Olympics, that advertising isn't outperforming" overall economic growth. "Call us greedy," wrote Fine.

The Wall Street outlook still isn't as robust as some Madison Avenue prognosticators had been predicting. The ad industry's official scorekeeper, Universal McCann Senior Vice President-Director of Forecasting Bob Coen, is set to announce his midyear update this morning and also is expected to revise his ad outlook upward. In December 2003, Coen predicted U.S. ad spending would rise 6.9 percent.

U.S., Worldwide Ad Growth

U.S. Worldwide
2001 -7.8% -8.2%
2002 +1.9% +1.2%
2003 +3.5% +2.4%
2004 +6.6% +5.5%
2005 +5.5% +5.0%

Source: Merrill Lynch. Estimates include measured media and exclude direct mail.
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