Consumers, Advertisers Feel Economic Crunch

Politicians may debate what constitutes a recession, but there's no question that the slowdown is hitting both consumers and advertisers in their pocketbooks. That's the gloomy conclusion of four reports released in the last couple of weeks by the National Research Network, the Conference Board, Worldwide Partners, and Sanford C. Bernstein and Co.

The NRN study "Consumer Cutbacks in Today's Soft Economy" examined consumer attitudes and spending behaviors in the first half of the year, especially those affecting mass retailers, including food service and big-box retailers. Although seemingly trivial, small changes in daily routine can reflect larger economic problems.

For example, 22% of respondents said they were spending less on gourmet coffee beverages--either cutting back or eliminating them entirely. Likewise, 69% of consumers said they visit the mall less often, and 63% said they shopped online less often. The trend of fewer mall visits was especially pronounced among women with children, people under the age of 65, and people with household incomes of less than $75,000 per year.



According to the Conference Board, consumer confidence remains quite low, at around 51.9 in July. (The index tracks indicators of consumer confidence for comparison against a baseline of 100 established in 1985). Lynn Franco, the director of the Conference Board, noted that consumers may be more hopeful about the long term, but "remain extremely grim about short-term prospects."

Overall, the percentage of consumers who said the business situation was "bad" rose slightly to 32.8% between June and July. The percentage of those who said jobs are "hard to get" also edged up to 30.3%.

As consumers tighten their belts, the global ad business is also suffering, according to a July survey by Worldwide Partners of over 80 executives from member agencies, including a substantial number located overseas. Roughly 60% of the global survey group said economic conditions were poor, but that number rose to 65% for agency bosses in North America. Forty-six percent of North American bosses said clients have cut spending in the last year, compared to 38% for the global survey group.

Rounding out the bad news, a quarterly survey from Sanford C. Bernstein & Co. found that total U.S. ad revenue declined 1.5% in the second quarter in comparison with the same period last year, due largely to ongoing losses by newspapers and television. The drop was mostly concentrated in local advertising, but with disturbing signs of growing weakness in national advertising as well. Also affected were magazines--which saw revenue fall 10% according to Bernstein, due to losses in categories including automobiles, pharmaceuticals, beauty, and computers.

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