Bellwether report sees few positive indicators

The war in Iraq, weak sales and falling profits are continuing to damage the confidence of Britain's advertisers, according to the IPA's latest Bellwether report.

Worries about the economic outlook have led to marketing budgets being revised down on average during the first quarter of this year, the survey shows.

And it sees little sign of significant improvement, describing the lack of predicted growth in adspend during 2003 as "the weakest forward-looking signal for advertising seen so far over the survey's three-year history". Budgets have been revised down continually during that period.

The only comfort for agencies is that the rate of decline in client spending has slowed. The research also suggests spends may rise on the back of returning consumer confidence following a successful end to the war.

Nevertheless, the report cautions against getting carried away over the fact that new budget setting by advertisers is at its most buoyant since late 2000.

"It's clear that companies retain substantial flexibility in controlling budgets over the course of the year as economic conditions change," it says.

Continued concerns among advertisers about the economy are also reflected in further shifts from above-the-line to below-the-line activity. Almost four out of ten companies said they were increasing their direct marketing spends in the belief that it was cheaper and more effective.

Similar reasons were cited by retailers for their decision to divert more resources into sales promotion activity.

At the same time, cost efficiency and greater accountability are cited by many advertisers for intensifying their online marketing activity, which is showing its steepest rise since the middle of 2000.

Almost one in every four companies taking part in the survey said they were boosting their internet marketing budgets, while just 5 per cent said they were reducing them.

Hamish Pringle, the IPA director-general, said the report reflected a "wait and see" attitude among advertisers towards spending their budgets.

"The war in Iraq as well as a continued tough climate is foremost on advertisers' minds, but there are definitely some encouraging indicators," he added. "The general picture appears to be that the rate of decline in media spend is slowing significantly."

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