Association of New Zealand Advertisers chief executive Lindsay Mouat predicts spending on advertising leading into the busy pre-Christmas period will be robust. (File image) Photo: RNZ / Rebekah Parsons-King
Storm clouds are on the horizon for the advertising sector, as high inflation and rising interest is likely to reduce businesses' marketing budgets in the new year.
Advertising agencies are seeing short-term decision making by clients as long-term spending is put on the backburner due to belt tightening.
Association of New Zealand Advertisers chief executive Lindsay Mouat said the outlook for next year was gloomy given the downturn in business and consumer confidence.
"I think it's very much clouds on the horizon - and perhaps leading to shorter term decision-making," Mouat said.
"So making commitments in the immediate term rather than looking forward."
Mouat predicted spending on advertising leading into the busy pre-Christmas period to be robust.
"There's always a big retail uptick because of the Christmas season and so forth - retailers are going to have to be advertising in that time," he said.
"The uncertainty that is there is more about next year than for the rest of this year."
While some companies tend to cut marketing during a recession, this was not a desirable strategy for long-term gain, Mouat said.
"In many ways, it's the worst time to be cutting back," he said.
"If you look at advertising as an investment, which businesses should rather than a cost, it has been consistently proven that those brands that continue to advertise through difficult times are the ones that come out of the other end in a stronger position and back into a growth phase.
"What the economic headwinds do is encourage businesses to really look at the product and service offering."
Industry-specific trends can also disrupt the advertising sector, he said. That was seen when the automotive industry was hit by severe supply chain issues.
"Every category is different. Even before we were considering these headwinds, one of the biggest challenges for a number of businesses was that they simply didn't have the product to sell," Mouat said.
"Car manufacturers didn't have enough product that they could promote to the public," he said.
"There will always be winners and losers in any economic situation and that comes back to where are consumers looking to spend their dollar.
"Whatever that situation, you still need to ensure that you've got a brand presence and ensure you are competing in whatever marketplace you are in."