Results from global advertising and public relations operator WPP (WPP) are ahead of expectations this morning with the shares up 0.9% to £15.53.

A strong fourth quarter sees like-for-like sales up 3.3% to £10.5 billion with adjusted operating profit of £1.77 billion against a consensus number of £1.67 billion. The company also notes 2016 has started ahead of budget, however the accompanying outlook statement from chief executive Martin Sorrell makes for pretty gloomy reading.

Advertisers, and WPP in particular thanks to its breadth, scale and geographic reach, are generally seen as good bellwethers for the economy because brands tend to increase ad spending in good times and scale back quickly when times get tougher.

Invoking everyone’s fictional favourite ad man from the US TV show Mad Men Sorrell argues against the bullish ‘Don Draper-ish’ attitude of his industry.

Sorrell writes: ‘To survive in the advertising and marketing services sector, you have to remain positive, indeed optimistic, seeing the glass half-full and industry and company reports generally continue, understandably, to reflect that attitude. However, general client behaviour does not reflect that state of mind, as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth.

‘In addition, there seem to be little, if any, reasons for an upside breakout from the current levels of real or nominal GDP growth, which remain stuck around 3% to 4% and below the pre-Lehman trend rate, which by definition was unsustainable.’

He highlights three key risks: the future direction of US interest rates; the possibility of a British exit from the European Union; and the collapsing oil price.

Issue Date: 04 Mar 2016