The recovery of the advanced economies from the 'great recession' of 2008-09 has been stuttering. This is not surprising. Countries rarely bounce back from slumps in a straight line, especially after a financial shock on the scale which brought the world economy to a shuddering halt in the Autumn of 2008.
So, when the estimates for first quarter growth in Britain and the United States were published late last month, there was much teeth gnashing. Labour's Shadow Chancellor Ed Balls - an accomplished economist - mischievously suggested that the British economy was 'flat-lining.' Another Labour spokesman contrasted the UK's 0.50 per cent expansion of output in the first quarter with the US's more buoyant 1.8 per cent.
Both interpretations were picked up in the broader media as evidence that Coalition economic policy had gone horribly wrong. But as the American writer Mark Twain famously noted, there are 'lies, damn lies and statistics.' Far from flat-lining as Balls suggested, the British economy climbed back in the first quarter from a 0.5 per cent snow-affected downturn in the final months of 2010. Moreover, if the first-quarter growth were to be repeated in the current quarter and over the rest of the year, growth would be up by two per cent. This is a higher figure than projected by the independent Office for Budget Responsibility in George Osborne's March budget.
As for the comparison with America's growth rate, it was plain wrong. The US calculates its quarterly growth rate on an annualised basis which means that, in fact, it grew at 0.4 per cent, a slower rate than the UK. Nevertheless, both economies will struggle this year as the fiscal squeeze bites and real incomes come under pressure in a difficult jobs market.
That said, there are reasons to be optimistic. Among the better forward-looking indicators for the world economy is the advertising market. The ever peripatetic Sir Martin Sorrell was surprisingly upbeat about prospects for this year and next when I talked to him about his WPP group's first quarter data. Sir Martin, the longest serving chief executive in the FTSE with a period at the top dating back to 1986, reported £2.2 billion in the first months of this year, outpacing the group's main global competitors.
Unsurprisingly, the fastest growth is coming from emerging markets with East Asia and Latin America leading the way. But he was also upbeat about demand from the fast-moving consumer goods companies in advanced economies. The surprise, if there is one, is that Sir Martin believes that traditional advertising outlets - print and free-to-air television - are still seen by the top companies as the best place to reach customers. Indeed, Sir Martin's optimism about free-to-air television was enough to lift the shares of ITV, now run by Sir Archie Norman and former Royal Mail chief Adam Crozier since the departure of Sir Michael Grade.
The great fear has been that traditional print and broadcasting media will be destroyed by the digital revolution. Certainly, as far as classified advertising is concerned, the damage has been done and local media has suffered greatly. But existing media, like newspapers and terrestrial television, is still the best way to reach mass audiences. Sir Martin notes that 29 per cent of the advertising market in the advanced economies has transferred to digital media such as Google. In the emerging markets it is slightly less. The figures show that the digital uptake increases by around one per cent a year and the WPP chief estimates that the digital uptake will, over time, eventually reach 47 per cent. But this may not necessarily destroy all traditional media.
Many newspaper groups, including the New York Times, the Daily Mail and the Guardian, are making the transition from paper to the web successfully. They are increasingly accessed through new media including the iPhone, iPad and Kindle. Similarly, commercial broadcasters will increasingly be streaming programmes through hand-held devices allowing them to retain control of a share of the traditional advertising market.
In the interim, advertising will remain an important driver of growth in the global economy. In the current phase of slow upturn in the advanced economies - where the spending power is greatest - commercials are critical to maintaining market share. Advertisers should also benefit from big events like the Royal Wedding and 2012 Olympics. Sometimes, it is too easy to see the glass as half empty.
