Monday, August 1, 2011

Markets turn negative as debt ceiling bounce proves short lived; will weakened economic outlook hurt ad budgets?; BBC journalists on 24-hour strike to protest staff cutbacks

So much for the anticipated debt ceiling bounce, huh? The markets are down now after opening flat to slightly up following the news last night of an agreement between the President and Republican leaders on the raising of the debt ceiling.
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Meanwhile, markets abroad have reacted in a similar fashion: with Asian markets starting the day higher, but European markets soon turning negative. As of 11 EDT the German DAX was actually down sharply, almost 150 points in the negative, down almost 2 percent. The British FTSE, was down more modestly.

The cause of the declines is always difficult to judge, but one thing that is now common wisdom is that the administration has adopted the Republican's preference for austerity over growth. The cuts in spending contained in the agreement with the GOP only call for modest cuts that will take effect immediately, but the agreement contains the seeds of big cuts down the road, with a "trigger" that could force major cuts to certain areas of the budget. This downsizing in the budget may be good news for those pushing for a balanced budget, but occurring during a recession they are seen by many as a formula for further economic contraction.

Adding to this bleak outlook is the present, which doesn't look all that great either. The Institute for Supply Management reported today that its index was at 50.9 percent in July.

"The PMI registered 50.9 percent, a decrease of 4.4 percentage points, indicating expansion in the manufacturing sector for the 24th consecutive month, although at a slower rate of growth than in June," Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee said today.

"Production and employment also showed continued growth in July, but at slower rates than in June. The New Orders Index registered 49.2 percent, indicating contraction for the first time since June of 2009, when it registered 48.9 percent. The rate of increase in prices slowed for the third consecutive month, dropping 9 percentage points in July to 59 percent. In the last three months combined, the Prices Index has declined by 26.5 percentage points, dropping from 85.5 percent in April to 59 percent in July."



The real question for publishers is will this effect ad budgets for the remainder of the year? This seems unlikely as we are already in August and most ad spending has been locked in at least until November. But we are now entering the period once known as "fall planning", that strange time when marketers get their 2012 budgets and begin accepting proposals from their ad reps.

Ad scheduling has certainly evolved over the past decade or so to the point where less and less ad schedules are locked in stone. But if the perception is that 2012 will not see a significant recovery of the economy, it could be bad news for those publishers who hoped that their publications would see some sort of rise in ad spending in the coming new year.



The BBC is broadcasting today with reduced staffs due to a 24-hour strike called by the national Union of Journalists in reaction to job losses at the World Service and Monitoring division.

The union represents 3000 employees and while BBC management say that a large number of them have shown up for work today, the union disputes this.

The World Service of the BBC announced early this year that if was cutting 650 positions as part of the Tory government's austerity program.

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