May 7, 2020 / 1:38 PM / 20 days ago

U.S. demand for cars expected to rebound while travel, dining lag: ad agency

(Reuters) - Consumer demand for cars could begin to recover this month in the United States after steep declines due to the coronavirus pandemic, but the hard-hit travel and dining industries will likely continue to face difficult times, according to a major U.S. advertising agency.

FILE PHOTO: New cars are seen lined up next to the dock as the global outbreak of the coronavirus disease (COVID-19) continues, at the Port of Los Angeles, California, U.S., April 29, 2020. REUTERS/Lucy Nicholson

The new forecasts on Thursday from Universal McCann, a unit of advertising holding company Interpublic Group (IPG.N), will be used to help advertisers plan their marketing campaigns as countries around the world prepare to lift stay-at-home orders. The U.S. advertising industry is expected to see billions of dollars in losses this year as the pandemic has battered the economy and brands have paused their marketing.

Auto, travel and dining brands such as General Motors Co (GM.N), Expedia Group Inc (EXPE.O) and McDonald’s Corp (MCD.N) are among the top advertising spenders in the United States.

Demand for cars could rise to 80% of pre-pandemic levels by the end of this month, the agency said.

“I was surprised to see the decrease [in demand] was not as big as I thought and that any rebound was occurring this early,” said Huw Griffiths, global chief product officer for Universal McCann, adding the rebound could be partly due to people aiming to travel in their own vehicles and avoid public transportation.

Though the auto industry is still weak compared with before the health crisis, car sales have been on the rise for the past five weeks in the United States, according to a report on Wednesday from consumer intelligence firm J.D. Power.

On the other hand, there are not yet any signs of recovery on the horizon for the travel industry, which has been particularly hit hard by the pandemic, Universal McCann said.

Even after travel restrictions are lifted, the industry may recover slowly in phases, with consumers traveling more domestically before they do internationally.

Similarly, demand for dining out is expected to recover just 20% by June, from its low levels in April, said Tara Connington, senior vice president of analytics and insights at Universal McCann, who led the development of the forecasting models.

“We’re seeing that it will be a slow rise,” she said. “As policy restrictions pare back, people will still be conservative.”

The agency produced the forecasts by using machine learning models based on what people are searching for online, combined with economic and health data, such as the number of new coronavirus cases in different regions, Connington

said.

Food delivery is one bright spot, with a doubling of demand between mid to late-March, and will likely continue to see high demand, the agency forecast. But sales of consumer electronics, which peaked in March and April as people looked for entertainment, are expected to drop back down to pre-pandemic levels by the end of this month.

Reporting by Sheila Dang; additional reporting by Joe White in Detroit; Editing by Steve Orlofsky

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