Advertising should benefit from looser budgets
LONDON (Reuters) - Advertising, information technology and outsourcing are among the sectors likely to benefit first from a cautious uptick in corporate spending as firms jostle for position coming out of the recession.
Although firms reporting this quarter are still entrenched in cost-cutting mode to prop up profits in the face of falling revenues, a few have begun running new advertising campaigns to gain an easy advantage in visibility while rivals lie low.
"It's probably a bit early yet to be expecting a big turnaround," said Gareth Williams of ING's equity strategy team. "It's more a story for next year than the next few months."
"But if there is a turnaround, it's probably going to be in areas like advertising and technology first, where it's easier to move quickly, than in more industrial, capital-intensive sectors," he said.
A survey in September by CFO Magazine and Duke University found that spending on advertising, research and development and technology was seen flat over the next 12 months after several negative quarters -- compared with continued declines elsewhere.
Capital spending was still expected to shrink, the poll of 657 U.S. finance executives found, although by a much smaller percentage than they forecast in the previous quarter.
Companies have been using capex cuts as a key measure to conserve cash.
BARGAIN-HUNTING
It looks as though investors could still snap up some bargains in sectors set for early recovery in Europe.
The European media index .SXMP has risen just 8.5 percent this year, compared with with a 20.5 percent increase in the DJ Stoxx 600 overall .STOXX. And technology .SX8P is up 16.4 percent, also less than the broader market.
The U.S. economy grew in the third quarter for the first time in a year, ending the worst recession in 70 years and raising hopes that Europe may soon follow. Eurozone GDP figures are due later this month.
And as business confidence rises, some companies are starting to hire again -- not permanent staff yet, but nonetheless a step in the direction of increasing capacity that is benefiting staffing firms in the first instance.
European temping and recruitment agencies have reported signs of improved business in recent weeks, in what could be a precursor to permanent hiring that would help a broad recovery.
Dutch staffing firm USG People (USGP.AS) has seen signs of recovery and expects stabilisation or a slight improvement in business conditions. UK recruitment agency Michael Page (MPI.L) also saw signs of stabilisation globally.
But although some sectors will likely bounce back quickly, they will certainly not return to previous levels any time soon. Continued...
