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S&P Sees Radio’s 2024 Growth Rate Keeping Pace With Overall Economic Expansion.


For radio managers still working on their 2024 budgets, S&P Global economists are offering some fresh data points. S&P has revised its 2023 and 2024 forecast and expects economic growth will cool off in 2024 but not enter a recession. When it comes to advertising, they say digital media will continue to grow the most. That said, S&P is forecasting radio advertising will grow 1.5% this year, keeping pace with the overall economy’s expansion, but it will take some patience to see those gains.


“We believe the first quarter of 2024 will be weak, with both economic and secular challenges on top of what is typically already a seasonally low quarter,” S&P says in its latest outlook. It expects to see improvement during the second half of 2024 amid improving macroeconomic conditions.


As radio executives are well aware, predicting radio’s future is tougher than ever. With some of the shortest lead times in media, S&P says there is “scarce visibility” into radio’s future performance. “We believe lead times have further compressed and radio companies now only have a few weeks to a month of visibility” S&P says in the report, adding, “It is our belief that greater visibility into any improvement in radio advertising trends is unlikely until the second quarter of 2024.”


Digital – now making up about 70% of total U.S. advertising – is similarly characterized by short lead times. “This has been exacerbated by advertisers' caution in committing to spending because they are concerned about potential macroeconomic weakness,” says S&P.


Radio industry revenue has had a 10% haircut since the pandemic, according to S&P. As broadcasters work to close that gap, here is one of the challenges S&P economists think radio will face: while digital advertising has largely recovered from a year when advertisers pulled back on spending due to fears about a potential recession, the same cannot be said about traditional media. It estimates that legacy media overall saw ad revenue decline 8.5% last year with linear TV down 10.8% while radio and print were both off by 7%. While S&P acknowledges the numbers are “skewed” by lower political advertising compared to 2022, it believes secular pressures, more than macroeconomic cyclical trends, are the main contributors of continued soft advertising spending on legacy media platforms.


“Companies have pulled back more on brand advertising over the last year and increasingly shifted their spending toward performance-based advertising as they look to use advertising budgets more efficiently,” the report says. “Similarly, national advertising has been more challenged over the last year, while local advertising has performed better due [to] its greater focus on direct response marketing.”


S&P thinks digital will be advertising’s “growth engine” this year, with revenue predicted to increase 10.2%, which is a modestly slower rate than the 10.5% rate that S&P says it had in 2023. Within the digital category, it sees gains for search (+9.5%), social media (+11%), and digital video (+15%) this year. S&P expects growth will moderate to 8.5% in 2025 primarily due to slower social media advertising.


The overall U.S. economy is expected to grow at a slower pace this year, according to S&P Global economists’ updated outlook. They say the resiliency of consumer-led GDP growth “will be tested” this year as spending on services is now back to its pre-pandemic trend, leaving little in the way of post-pandemic catch-up demand. Economists say that household spending will likely be more in line with real income growth as savings have dwindled, while there are also signs that higher interest rates are starting to put a squeeze on consumers.


S&P expects the U.S. economy will expand 1.5% in 2024, up from 1.3% in its September outlook. It predicts consumer spending will grow 1.8% while core inflation will fall closer to the Fed’s target of two percent on a sustained basis by mid-2024. S&P also thinks hiring will slow and unemployment will rise through 2024 to reflect the slowing pace of economic growth.


“We believe there is greater downside risk to our 2024 advertising forecast than upside potential,” the report says. “Lower economic growth could stall any improvement in legacy advertising.”

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