Market recovery in 2010 'may be short-lived'

WPP, the world's largest advertising group by revenue, sees a "recovery of sorts" in global markets in the first half of 2010 but it could be short-lived, said Chief Executive Martin Sorrell.

"I think there will be a recovery, it's more likely to come in the first half of next year than this year, but I do think the issue is the longer term," said Sorrell, speaking from London to the Reuters Global Technology Summit in Paris via video link. "I think psychologically the mood in the last couple of months has got better, but that's not reflected so far in the real world.

"Particularly in America, if you ask CEOs or CMOs how they feel, they would say they feel more confident or better than say two or three months ago. But has that translated into increased spending or willingness to commit?

"I think the answer is no.

"Whether that is due to restocking or genuine green shoots, I think we don't know, it's too early to call."

Sorrell said generally the mood was better and there had been a relief rally in the stock market because "Armageddon doesn't seem to have happened".

He said the Chinese advertising market continued to show signs of easing as spending by multinational companies began to return, and said WPP would continue to make the necessary investments to capitalise on opportunities there.

Asked how long before he expected to see a recovery, Sorrell said 2009 would be more difficult than most people had predicted.

"It will continue to be a very difficult year, I've said before, it's a right off.

"Most American CEOs seem to indicate that in the fourth quarter of this year things will look a little bit better and as we go into 2010 things will look better.

"It will be a recovery of shorts. It will be L shaped, maybe an italic L, that is flipping up."

But Sorrell said the issue was more long term and about how governments cope with the overspending and fiscal issues.

"Do governments cut the spending, increase taxes and unemployment and deal with the overspending issues, or do they inflate their way out of it, which means that long-term interest rates are going to rise?"

Of the different sectors, he said companies were wanting more consumer insight, above all else, but that in media planning and buying some rivals had been viciously aggressive, which was verging on the suicidal, and he warned that it could not continue.

"There has been some lunatic price cutting, particularly in the media planning and buying business that is unsustainable, uncompetitive and will lead to tears."

WPP bought market research group TNS last year, which has boosted its ability to provide consumer insight, and said it had its hands full with the integration. But Sorrell said it could still look at small acquisition deals.

He also said WPP's recent convertible bond showed the credit market was improving.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.