Why a Double-Dip Recession Would Be All Europe's Fault
If the global economy tips into a double-dip recession it may be all Europe's fault, if the revenue growth charts of the major ad agency holding companies are to be believed. If you believe that advertising revenues are a proxy indicator for economic growth -- companies don't generally increase their advertising budgets if they believe their future sales will be down -- then the lack of ad activity in Europe is a real concern.
There's broad growth in ad agency revenues across all geographic regions of the globe -- except for mainland Europe. It raises the question over whether lack of growth in Europe is dampening demand for U.S. exports, and thus threatening the nascent recovery here.
Here are the revenue growth charts, by region, from the four biggest ad agency holding companies, WPP (WPPGY), Omnicom (OMC), Interpublic (IPG) and Publicis (PUB). Note that at all the companies are seeing growth in the U.S., and, by contrast, Europe is holding them all back (click to enlarge images):
- WPP's best growth is in the U.S. and U.K., with Asia and Europe lagging.
- Omnicom saw growth in the U.S., U.K. and "other" regions, but not in Europe.
- IPG saw growth in the U.S., Asia, and Latin America, but a retraction acorss all of Europe.
- Publicis saw growth in all regions except the Middle East and Africa. Its growth in Europe, however, was the most anemic of the areas where it added business.
Note that while unemployment remains stubbornly high, much of those job losses are due to government jobs -- such as the U.S. Census -- coming to an end. It's the private sector that is providing what job growth we have.
That ought to be good news for advertisers and consumers, and would explain why -- despite the doom and gloom expressed elsewhere -- ad agency CEOs are expecting more growth in Q3 2010. (Publicis CEO Maurice Levy just upped his Q3 guidance, for instance.)
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