Ad spend in the US will grow more than initially expected this year, per S&P

Chin up, marketers: Things (may) not be looking so bad for ad spend in the coming months despite recent talk of a recession and the continued effects of the pandemic.

Ad spend in the US is expected to grow 2.8% this year, according to a forecast from S&P Global Ratings, a small bump from its initial prediction of 2.6%. Next year, it’s predicted to increase by 8.4%.

“Our economists forecast that a recession, while it could happen later in the year than we had originally anticipated, will also likely be milder than what we anticipated at the beginning of the year,” Naveen Sarma, senior director of US media and telecommunications for S&P, said. Overall, S&P analysts expect a “very shallow recession” during the second and third quarters of the year.

Digital advertising is expected to grow 9% this year, the largest increase of any channel measured. Outdoor advertising is projected to grow 5%. Meanwhile, TV is expected to drop 8.1%, while radio is expected to  see a 10% drop, per the report.

S&P compiled the data using numbers from its media research division, Kagan, and conversations with various companies, including Disney and Paramount, Sarma said.

Sarma noted that “historically, advertising was always a lagging indicator of economic activity. Economies went into recession or started to slow down, and then you started to see advertising start to slow a quarter or two later than the GDP numbers that we were looking at,” he said.

However, according to Sarma, because so much advertising is now sold digitally, or “right before airtime,” it has become a leading indicator of economic activity. He pointed to the fact that digital platforms like Facebook and Google saw a “slowdown in advertising spending” as early as the first half of last year when economic concerns set in.

“It’s an interesting dynamic that we hadn’t seen in any of the other economic slowdowns in the past, whether it was 2008 or 2001,” he said. “Advertising always slowed down later than the economy. In this case, we’re actually starting to see it slow down ahead of the economy.”