Starcom Mediavest has reversed its forecast for an increase in ad spend this year, and now predicts a 2% fall in its Media Futures mid-year update.
The agency network had originally forecast growth of 2.6% for the year. The second half of the year is now expected to see a decline of 3.8% after a relatively flat first half, down just 0.3% year on year.
A quarter of advertisers have increased ad-spend year-on-year to date, but most have decline or remained stable. TV and magazines both benefited from budget increases but also lost out the most from advertisers cutting their spend.
Starcom has revised its predictions down at the midway point for the past four years, but CEO Chris Nolan says this revision is “unusually large”.
“We often observe mid-year corrections, however, this correction is unprecedented. It appears to correlate with a significant decline in the May consumer confidence levels. ” Nolan said.
“It’s worth noting that the Federal Government budget was also released in May.”
Free to air TV is likely to be most impacted, according to the report, and declines will be felt across all channels. Investment in owned and earned media is still expected to grow 4.9% but has been downgraded from expected growth of 7.8%. Advertisers still spend more time and effort on owned and earned media than they do dollars, according to Nolan.
A decrease is expected by 38% of advertisers, 42% expect no change in their spend and just 13% are predicting a year-on-year increase in the second half.
Nearly half (44%) of advertisers expecting to decrease their ad spend in the second half of the year anticipate the fall being more than they expected at the start of the year.
The downgrade is in line with figures put out by Warc last week, which also indicated weaker than expected ad spending this year. Warc's global report gave the Australian market the biggest downgrade of any country bar Russia, but it still anticipates 2.1% growth. It had originally forecast growth of 3.6%.
Media Futures is carried out by McNair Ingenuity Research. Interviews with a representative sample of the top 600 advertisers and every major media sales director were carried out between November 2013 and January 2014.
Starcom Mediavest announced last week is splitting out into two divisions, with - Starcom and Mediavest operating separately. Mediavest will handle media buying for Diageo, which also revealed last month that it is shifting media strategy into creative agency Leo Burnett.
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