The global advertising industry, which has already suffered almost two years of recession, is set to wait until 2004 for a "significant recovery", sector giant WPP has said.

WPP, the world's largest advertising firm, warned that recent share price tumbles and falls in consumer confidence had threatened a revival which executives had hoped to start later this year.

North America has been most affected by the recession, with Continental Europe least affected

WPP statement

The rebound will most likely not happen for a further two years, when the Athens Olympics and US presidential elections will have a "positive effect" on trade.

"It seems unlikely that significantly improved performance will occur in 2002 and that any recovery will have to await 2003 or, perhaps, even more likely 2004," the company said.

The warning came as WPP reported pre-tax profits of �210.4m ($294m) for the first six months of the year, 17% below the earning reported a year before and lower than analysts had expected.

And it will undermine hopes of an advertising recovery raised last week by TV and newspaper giant News Corp, which reported a nascent rebound in revenues to its UK tabloids The Sun and the News of the World.

Lobbying squeeze

WPP, owner of advertising giants including Ogilvy & Mather and J Walter Thompson, said its deteriorating performance reflected "difficult" economic conditions, with revenues in the US hit particularly hard.

"North America has been most affected by the recession, with Continental Europe least affected," Tuesday's statement said.

Latin American operations were beginning to suffer the effects Argentine crisis, the briefing added.

By operational sector, the firm's corporate communications and lobbying businesses had fared worst from the global slowdown, seeing revenues slide by 11%.

The pure advertising firms saw revenues slide by more than 2%.

But WPP companies had cut staff to help weather the downturn, with payroll numbers 9% lower in June than a year before, once the affect of takeovers was stripped out.

Acquisition spree

The advertising and corporate lobbying market expanded rapidly during the mid-to-late 1990s, fuelled in part by the rise of thousands of publicity-hungry technology companies.

WPP took advantage of the good times to snap up its US-based rival Young & Rubicam in a $4.7bn deal which made it the world's biggest advertising and communications group.

Last year, the company attempted to withdraw a takeover bid for the Tempus media buying agency, citing the sudden downturn in advertising revenues.

But the deal went ahead at the originally agreed price of �434m.

WPP shares, which rallied sharply on Monday, were down 5 pence at 485p in early trade in London.

WPP shares closed 32p, or 6.4%, lower at 468p on Tuesday, having touched 451p in early trade.

The shares topped 1,302p in March 2000.