Economic slowdown won't curb DM expenditure growth: DMA report

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Despite a U.S. economy that shows signs of decline in some key areas, growth is predicted in direct marketing expenditures, sales, ROI and employment through 2007, according to The Power of Direct Marketing, the Direct Marketing Association's annual forecast of DM's economic impact on the economy.

The 2006 edition of the DMA report, which has been ongoing since 1995, was released on Oct. 17 at the DMA06 conference and exhibition here.

"Despite a moderating growth in DM expenditure and sales, direct marketing will still help to drive the U.S. economy as a whole," said Peter Johnson, DMA's vice president of research and market intelligence and lead author of the report.

"Total U.S. sales are forecasted to grow by 3.9 percent through the end of 2007, while direct marketing-driven sales are expected to grow at a faster rate, by 6.5 percent," he said. "So with direct marketing's relatively superior growth rate into 2007, direct marketing will help bolster the rest of the economy."

Overall U.S. gross domestic product in 2006 will benefit from strong growth generated by direct marketing, and DM advertising across all economic sectors is expected to contribute more than $1.37 trillion of incremental final demand nationwide, accounting for 10.3 percent of total U.S. GDP.

The report also found that $166.5 billion in DM advertising expenditures that marketers are predicted to lay out in 2006 represents a solid 6 percent gain over 2005 spending.

According to the report, marketing expenditures this year were part of a strong rebound from hurricanes Katrina and Rita, after these storms postponed expenditures in many economic sectors from late 2005 into the first half of 2006.

The growth rate in DM expenditure through 2007 is expected to moderate further to 5.2 percent, translating to $175.2 billion in direct marketing spending for 2007, according to the DMA's report.

The report predicts also that the advertising media most affected by 2007's forecast moderating expenditure will be the direct mail, direct response television and catalog channels.

The DMA's "The Power of Direct Forecast" report was prepared in August using the econometric model of U.S. direct marketing activity updated every year for the DMA by Global Insight.

Incorporating the most recent data available on developments in all sectors of U.S. industry, it aims to help marketers plan expenditures, sales, ROI and employment for the 16-month period through end of 2007.

The areas of direct mail expenditures that show declines include direct mail spending in the lumber, real estate and automotive categories. The reason for this is that these areas are about to see a slump.

"You could be the greatest marketer in the world, but if the pool you are diving into had all the water drained out of it - splat," Mr. Johnson said.

As for predictions, Mr. Johnson said "2006 was an A-plus year, and 2007 will be an A-minus, but for some verticals, it will be a C-minus year."

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