Advertising still suffering
The services sector in Cyprus continues to perform strongly, according to data on the turnover value of service activities produced by the Statistical Service CYSTAT, with several subsectors showing double-digit increases.
However, despite the good news, businesses appear to be holding back on advertising.
The fastest rising services sector in terms of value in the third quarter of 2005 was ‘investigation and security activities’, rising by 15.5% compared with the third quarter of 2004.
The second fastest rise came from the broad sector called ‘miscellaneous business activities’, which rose by 15.3% year on year.
The professional services sector also showed buoyancy with a 11.8% rise in the subsector that includes legal, accounting and consultancy. On a year-to-date basis, this sector has risen the fastest, up by 11.9% in January-September.
Evidence that the construction sector is bouncing back to life is also to be seen in the 11.1% rise in architectural, engineering and various other related technical activities in the third quarter, after a single-digit rise in the first two quarters.
Why is advertising down?
Among all this buoyancy, one sector, advertising, stands out as performing badly. Indeed, it is the only sector which has declined at all this year, sliding by 0.9% in the third quarter compared with the third quarter of 2003.
Three words explain why: Bank of Cyprus. In an effort to trim costs, the biggest advertiser on the island slashed its budget severely for 2005. As if my magic, the other banks cut their budgets by exactly the same large percentage. Then followed the other big advertisers in the country.
Since advertising budgets are fixed in stone in Cyprus, and not adjusted according to revenue, this meant that the cutbacks were felt for the whole year, even when business was picking up.
From an economist’s point of view, this also means that advertising in Cyprus must be a lagging indicator, rather than a leading one, as it is everywhere else in the world.
But maybe it also means that all the major advertisers will magically decide to raise their budgets by the same percentage for 2006.
Fiona Mullen
