Zenith Raises U.S., Global 2016 Ad Forecasts, Reduces U.K. Growth Estimate Due to Brexit

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The Olympics are a boost to ad spending this year.

"We expect U.S. network TV to return to growth this year (at 1 percent) after shrinking 5 percent last year," says the forecaster, which boosts its U.S. projection from 3.8 percent to 4.4 percent.

Global advertising spending will post stronger-than-expected 4.4 percent growth this year to $539 billion amid strong U.S. trends, forecaster Zenith said Monday in its latest projection. In June, it had forecast a 4.1 percent gain.

It now forecasts U.S. ad spending growth of 4.4 percent this year, compared to a previous prediction for a 3.8 percent improvement.

"This upgrade is mainly the result of stronger‐than‐expected growth in the U.S., where a strong labor market has encouraged consumers to increase their expenditure, and advertisers have fought harder for their share of the expanding market," Zenith said about its new global estimates.

It added: "We expect U.S. network TV to return to growth this year (at 1 percent) after shrinking 5 percent last year, thanks to new spending by pharmaceutical and consumer packaged goods companies and a strong upfront. We also expect social media to accelerate from 32 percent growth last year to 35 percent growth this year, as advertisers take advantage of new formats, such as in‐feed video, and the transition to mobile internet consumption continues."

Zenith also slightly raised its growth expectations for Asia Pacific and Western Europe.

The media planner and ad prognosticator on Monday also increased its global ad forecast for 2017 to 4.5 percent, from 4.3 percent, and for 2018 to 4.6 percent, up from 4.4 percent.

Zenith also discussed the impact of Britain's Brexit vote in June, reducing its 2016 U.K. ad growth forecast from 5.6 percent to 5.4 percent. "Although the vote for Brexit in the U.K.’s EU referendum came as a shock to many in the market, so far advertisers have reacted calmly, with no widespread budget reductions," it said. "As we have argued before, most of the impact that Brexit will have on the U.K. ad market will come in the long term."

Detailed Zenith: "The U.K.’s new terms of trade with the EU and other countries — whatever they turn out to be — are likely to restrict flows of trade and investment in comparison with the pre‐Brexit status quo, leading to slower economic growth and slower growth in advertising expenditure. In the short term, uncertainty about the consequences of the vote will make companies less likely to invest in new products, and consumers less likely to take on big spending commitments. This could lead to anything from disappointingly slow growth to outright recession."

Its current forecasts assume that economic growth will slow, but remain positive, in which case U.K. ad spending growth could come in at 3.4 percent next year, down from Zenith's previous 4.0 percent forecast, the firm said.

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