New Study Confirms Advertising as Key Driver of the U.S. Economy; Advertising Is a Major Contributor to GDP, National Employment and Labor Income

According to a new report, advertising contributed $3.4 trillion to the U.S. GDP in 2014, comprising 19 percent of the nation’s total economic output.  The report was commissioned by the Association of National Advertisers (ANA) and The Advertising Coalition, which represents the nation’s leading advertisers, advertising agencies and media companies.

The research by IHS Economics and Country Risk provides a comprehensive assessment of the contribution of advertising to national, state, and regional economic activity across 17 industries.  The data details the impact of advertising on the economy of the U.S., the 50 states and each of the nation’s 435 congressional districts, using an econometric model developed by the late Nobel Laureate Dr. Lawrence R. Klein, adapted to account for changes in the structure of the U.S. economy.

Among other highlights from the report, researchers determined that:

• Advertising expenditures generated $5.8 trillion in overall consumer sales including direct, indirect and induced expenditures;
• The expenditures represent 16 percent of all sales activity in the U.S.;
• Advertising spending will increase at an average annual rate of 3.3 percent through 2019;
• By 2019, advertising will directly and indirectly foster $7.4 trillion in U.S. economic activity; and
• By 2019, advertising will help support more than 23 million U.S. jobs.

“This new study underscores the essential nature of advertising in promoting both business and economic growth in this country,” said Bob Liodice, President and Chief Executive Officer of ANA. “The very fact that this industry contributes nearly 20 percent to the nation’s GDP sends a powerful reminder to policymakers that advertising is an essential stimulus to the U.S economy that should be promoted and not subjected to a tax.  We have long known that the economic value of advertising extends into other sectors like manufacturing, agriculture, health care, retail, and numerous other areas of the economy.  ANA is proud to see data that affirms that advertising is a major contributor of revenue and a true engine of job creation in the U.S.”

“Time and again, the data supports that advertising brings a unique benefit to the U.S. economy,” said Bob Flanagan, Director at IHS. “When considering the impact the advertising  industry has had on the output of goods and services in this country, and the creation and retention of U.S. jobs as a result, there are very few American industries that can compare in terms of across-the-board economic value.”

In addition to its contributions to U.S. sales and GDP, advertising also supported 20 million American jobs in 2014 according to the IHS study.  As such, the advertising industry supported $1.9 trillion in salaries and wages, or 17 percent of the total labor income in the U.S. last year, with every job in advertising supporting another 34 American jobs in other sectors.

Throughout the study, IHS researchers also examined the effect of a tax proposal that would alter the treatment of advertising as an ordinary and necessary business expense, which has been part of the tax code since the original creation of the deduction in 1913.  The proposal would only allow businesses who advertise to deduct 50 percent of all annual advertising expenses with the balance to be amortized over five years. As recognized by 88 members of the House of Representatives earlier this year, severely burdening this job-creating revenue source would have a devastating impact on our national economy.

The full report, an executive summary and other related materials can be found here.