Advertising spending lags behind confidence in economy

Expenditure remains ‘fragile’ despite more positive mood, industry barometer finds

Thu, Mar 27, 2014, 01:05

The sensitivity of advertising spending to the prevailing economic winds continued in the final three months of 2013, the Association of Advertisers in Ireland’s expenditure barometer suggests.

The seasonally adjusted trend in advertising expenditure reacted positively to the gradual improvement in economic conditions during the first three quarters of last year, but weakened in line with gross domestic product (GDP) in the fourth quarter.

On a year-on-year basis, advertising expenditure fell 0.3 per cent in the final quarter of 2013, during which time GDP declined 1.4 per cent, according to the report by economist Jim Power.

Advertising spending trends continue to lag behind a pattern of growth in business confidence and consumer confidence, which is at its highest point in almost seven years.

“There is a marked divergence between consumer confidence, which is now on a strong upward trend and advertising expenditure, which is still very fragile,” says Power.

“It is likely that if business confidence continues to gradually improve during 2014, which is expected, a gradual improvement in expenditure on advertising could be soon,” he adds.

History lessons
However, although there are now “tentative signs of stabilisation” in ad spending, history suggests the recovery in budgets will lag the economic recovery.

“Business success and job creation are heavily dependent on being able to market goods and services properly, and without adequate marketing activity, both will be undermined,” warns Power.

The AAI barometer is designed to track trends in advertising as the industry emerges from recession that saw budgets slashed.

Between the final quarter of 2008 and the final quarter of 2013, overall advertising expenditure in Ireland declined 10.6 per cent.

But all mediums did not suffer equally – spending on traditional media (press, television, radio, outdoor and cinema) fell by 18.7 per cent, while online advertising increased by 65.5 per
cent.