I love writing this blog. Every time I sit down to gather my thoughts on what’s happening macro-economically and how that affects Local Advertising spending, I find comfort in the cyclicality of the data, and I love looking back on what we expected to happen to see if it came to fruition. Lastly, I’m always most curious about what has changed since last time and how that will influence what’s to come.
And boy, do we have lots to check in on and update! First, let’s talk about the macro-economy and inflation and then we will focus on Political.
If you’re a dedicated reader of this blog (Hi Mom!), you know that we have been talking about inflation for well over a year and, most importantly, we have observed that while inflation was on the rise, consumer spending patterns went largely unchanged. Consumers were keeping up with inflation using a combination of higher wages and dipping into credit usage more. That pattern began to change towards the end of 2023 as we started to observe an increase in brand switching in the QSR sector along with other price-sensitive verticals.
Now, everyone is in on the “Deals and Savings” messaging. QSRs are at war over prices and value meals. Large box stores are cutting prices to remain competitive and bring in new customers. This has a significant impact on the US economy. On any given day, more people shop at Walmart in the US than live in all Canada. Consumer debt is increasing at alarming rates, especially for those that are in the bottom 20% in terms of Household Income.
What does this mean for Local Advertising? Lots of opportunity!
As consumers are looking for savings and ways to stretch their dollars, this is the time to attract new customers. Local businesses would do well to push two types of messaging here: First, focus on locking in your existing customers with more loyalty-related messaging such as discounts for using the app or subscription services. Second there needs to be more “top of funnel” messaging that focuses on competitive prices and value. These messages will be to attract new customers unhappy with their current situation.
Overall, as the forecast team is working on updating our numbers, we are expecting to temper expectations for 2024. Earlier in the year, it looked like inflation and consumer spending were going to cross and the Fed would need to reduce interest rates over the Summer or in the early Fall. While we are seeing this pressure building in the macro-economy, the Fed has indicated that they are not ready to step in and bring down rates just yet. Therefore, assuming interest rates stay high until the end of 2024, that will mean that the growth we were forecasting in the back half will not likely happen until 2025.
That being said, one vertical that remains strong and may even grow a bit more is Political. Last we talked about Political, Nikki Haley was still in the discussion so, while our overall Political forecast hasn’t changed much, the details and nuances have.
Overall, we are expecting $11.1 Billion will be spent on Local Political advertising in 2024. With battleground states already in full swing and Senate races in places like Montana garnering more spending than we’ve ever seen in the past, the only hesitation on raising the Political forecast would be the ability to raise enough money to spend at these levels – can the Democrats and Republicans raise about $20 Billion, which is what would be needed to spend up to $12 Billion in Local Advertising? So far the answer is yes. Democrats and Republicans are raising money like never before which means we will see spending like never before.
We will be here to track it all and keep up with the changes and they happen! Stay tuned for the next Economic Pulse!
And if you are wondering about the media and verticals in our forecast, take a look at our fresh explanations to see the scope of what we cover.
