Near-Perfect Economic Growth Measure Breaks Down in Digital Age

(Bloomberg) -- Advertising spending’s almost-perfect record in tracking global growth could be shattered as big ad agencies are challenged by a changing industry landscape, according to global marketing firm Dentsu Aegis Network Ltd.

Global ad spending has been a strong coincident indicator of world GDP growth, with a 0.89 correlation from 2001-17, according to Dentsu Aegis data. For the past six quarters, though, Chief Executive Officer Jerry Buhlmann is seeing demand among the bigger players in North America slide, even as U.S. growth remains on a solid path.

Near-Perfect Economic Growth Measure Breaks Down in Digital Age

That’s calling into question whether ad spending can remain a good proxy for growth across the world.

“The key advertisers are growing at a much slower rate,” said Buhlmann. “They’re cutting back on marketing, they’re cutting back on ad spend, principally because they’re in this challenging position where they’ve built these big brands, but they don’t control the retail outlet, and they’re being challenged much more by local, more agile competitors.”

Dentsu Aegis compiles the figures for 59 markets worldwide across television, newspapers, magazines, radio, cinema, out-of-home and digital media.

Buhlmann’s got a new proxy for economic growth. In a bid to capture what they believe is the most important measure of whether an economy is prepared to harbor the most up-to-date growth drivers, Dentsu Aegis has aimed to track digital engagement across economies.

The Digital Society Index so far tracks 10 of the largest economies in the world, with the U.K., U.S. and China taking the lead on a combined score of three consumer metrics: dynamism, inclusion and trust.

While the U.K. scored relatively high on each of the three metrics, consumers in the U.S. demonstrated less trust in the digital economy while China lagged on dynamism -- productivity advances in information, computing and technology.

“As the key growth certainty in the world, the more engaged you are, the more likely you’re going to have economic success,” Buhlmann said.

The results, which incorporated the views of 20,000 respondents across those 10 economies, also provide a damping on global growth optimism. Of all surveyed, fewer than half of consumers were convinced that the digital economy is a positive thing, with fewer than a third seeing it as a job creator.

©2018 Bloomberg L.P.