As the world’s largest advertising agency, WPP is therefore in a good position to take the pulse of the macro economic recovery. Unfortunately, the messages WPP boss Sir Martin Sorrell is giving are mixed.
WPP boosted profits and revenues in the first trading half, benefiting from stronger business confidence in most regions apart from the eurozone. So far, so good.
Adjusted profits, stripping out the strength of sterling, rose a decent 15 per cent. Again, not bad. But Sorrell has flagged up the uncertainties being caused for business by gathering macro clouds, which are short of a perfect storm but nevertheless have a disturbing synchronicity.
The advertising doyen cites the crisis in Ukraine, China’s tensions with other Asian powers in the resource-rich South China Sea, an unstable Middle East, the US budget deficit, the Scottish independence referendum and the UK’s uncertain medium-term membership of the European Union.
This is bad news for WPP and the advertising and public relations industry in general because, after a lengthy period of abstinence in the downturn, businesses had been strengthening their advertising and marketing budgets again to capitalise on the recovery.
Such a geopolitical patchwork of uncertainty, however, might rein in businesses’ new-found optimism until they have greater line of sight on the likely duration of the politically charged backdrop.
That, however, would also have unwelcome consequences for the wider economy. If businesses revert to a focus on cost-cutting and margin protection rather than revenue growth, the recovery will look more than ever like a consumer-led, debt-fuelled one rather than the real McCoy, where business investment and exports are healthy.
This chequered picture from the advertising world reflects some of the recent volatility in stock markets. Investors know we have clearly reached escape velocity from the 2008-9 recession, and the earnings fundamentals suggest stocks are a buy. But major political wild cards suggest caution.