A mood of cautious optimism prevails among forecasters and marketing directors for the year ahead. Rather than recession, they expect a slowdown that, to some extent, will be a correction after two years of rapid growth fuelled by the dotcom bonanza.
The economic fundamentals remain strong: interest rates and inflation are at an all-time low and, despite big job losses, unemployment is at historically low levels. Disposable incomes continue to rise and, notwithstanding the downturn in the US and the events of September 11, British consumers have "hardly flinched", says Toyota commercial director Mike Moran.
Nevertheless, while the car and housing markets are expected to remain buoyant, many airlines, hotels and travel operators will continue to struggle as a direct consequence of the September 11 attacks.
Technology companies will continue to suffer from growing penetration rates and potentially slower adoption of new technologies. And over-capacity, financial fragility and fears about the commercial viability of3G mobile phones will dog the telecoms sector.
But it is developments in the retail and leisure markets that mark a fundamental change in consumerism. The slowdown in retailing represents a long-term trend rather than a correction, says Verdict Research.
Retailing's share of total consumer expenditure has dropped from 47% in 1980 to 33% today, and Verdict expects it to fall to 28% by 2006 as private education and health care, eating out, holidays, internet access and mobile phones capture money that would once have been spent in shops.
Essentially, glutted with 'stuff', consumers are now looking to enhance their quality of life. Martin Hayward, chairman of strategic marketing consultancy The Henley Centre, says: "When we asked people what they wanted for Christmas, things such as time, sleep, a holiday, sex and fun were as important as traditional gifts. And the more cash-rich and time-poor consumers become, the greater the opportunities for leisure and experience providers."
But there is uncertainty about the economy and the consumer psyche. Equity markets are volatile and the economy could nosedive if tension in the Middle East were to escalate and spark an oil crisis. And consumer confidence is also unpredictable. As Hayward says: "Shopping is still fun, but ultimately there is a post-materialist feeling-reinforced by the events of September 11 - that there is more to life than buying things."
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According to the Institute of Practitioners in Advertising's Bellwether report, which tracks advertisers' spending intentions, advertisers expect the current downturn to be brief. Twice the number of companies are marking up this year's budgets as trimming them.
Financial services, travel/transport and entertainment/media are more likely to have revised their budgets downward, while retail, FMCG and consumer durables have set, on average, higher budgets than last year.
Above-the-line adspend has suffered in favour of direct marketing and sales promotion. And spending on internet-related activity, which in some companies includes all e-commerce projects, has fallen as a proportion of total marketing spend.
By contrast, the Chartered Institute of Marketing's (CIM) latest quarterly Marketing Trends Survey shows the most pessimistic expectations for sales growth since the survey started in 1994. Firms are responding by making further cuts to their marketing spend, says the survey.
"Sectors like as advertising, consultancy, media and financial services are all likely to be affected by this," says Douglas McWilliams, economic adviser to the CIM and chief executive of the Centre for Economics and Business Research. "The survey provides convincing evidence that economic conditions are likely to be tough for the next six to nine months."
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