Points of light in a lowering sky

The best thing that can be said about 2002 is that it is nearly over. Surely we cannot, economically speaking, be about to experience another year which is its equal in sombre forecasts, downbeat developments and depressing false starts. Or can we?

Well, the forecasts at least have taken a turn for the better. A recent offering from MindShare suggests modest advertising growth of about 2.4 per cent next year, and the Zenith Media and Advertising Association forecasts are also passably upbeat.

At first sight, it’s difficult to see where this cautious optimism springs from, other than a vested interest in growth and a dogged belief that the everlasting gloom must, by the sheer momentum of the economic cycle, be dispelled some time soon.

Let’s face it, the short-term portents are not good. War with Iraq appears increasingly inevitable; and unless resolved fairly surgically, the situation will continue to have a dampening effect on the business community as it frets over the stability of oil supplies. Then, too, we have the threatened implosion of the UK housing boom. To some extent the doomsaying on this subject has been deliberately orchestrated, and for ulterior motives. But it cannot be denied that price increases of 20 per cent-plus a year, in what is otherwise a low-inflation economy, are unsustainable. A landing, soft or hard, is long overdue. When it finally happens, a widely held view is that the remaining props to consumer confidence will buckle and growth will peter out.

This is rather a drastic view. There is no certainty that the housing boom will end in a general bust. And, by way of counterpoint, there are limited signs of recovery in the media and other sectors where this downturn began. Of course, such evidence is anecdotal. Yet it cannot be pure coincidence that many of the blue-chip packaged-goods leaders are performing better. Unilever continues to power ahead, but it is notable that Gillette and Reckitt Benckiser have done better, and that P&G has now had four successive quarters of growth, allowing it easily to exceed its forecasts. The jury is out on Coca-Cola and McDonald’s, but at least active recovery programmes are in place.

On the media front, it would be surprising if sector bellwether ITV did not have a better year. Advertisers, many of whom have been understandably reluctant to commit to mainstream terrestrial TV in the recent past, have at least two good reasons to reconsider their position. The first is the technical deflation which will take place in the early months of next year, as a result of the imploding BARB figures fiasco at the beginning of 2002. The net effect of an upward readjustment year on year will be to give advertisers more viewers for less money, in the short term at least. Additionally, now that complex corporate issues surrounding the Communications Bill are at last being settled, ITV can concentrate on what advertisers actually want: better programmes and more confident branding.

We might add that interesting developments are in progress on the high street. The likes of Woolworths and Boots may have lost their way, but a new generation of retail entrepreneurs, led by Philip Green, seems ready to give more vigorous direction.