Advertising agency WPP has long been considered a bellwether for its industry. Some see if as a decent barometer for the wider economic climate too – when companies are feeling confident they will spend more on advertising and marketing, and when they are more cautious this spending will be cut back. WPP is a particularly useful indicator because of the scale and breadth of its operations.
WPP’s first-half numbers actually look fairly solid, but investors are so concerned about the economic backdrop, and what it says about WPP’s prospects, they have reacted negatively.
“Clearly there is a belief that WPP’s recent momentum, which helped it lift its annual sales outlook, can’t last in the long-term,” said AJ Bell’s Russ Mould.
“While chief executive Mark Read argues WPP is yet to see any evidence of a big retrenchment in spending by its clients, this feels likely to come at some point.
“And while the UK, now braced for a recession following the Bank of England’s woeful update, makes only a relatively limited overall contribution to the group, the global economic picture is not that healthy either.
“At least WPP will head into any downturn in somewhat better shape than it was in a few years ago. It is now a more streamlined business, following Read’s turnaround efforts.