Fears that major economies will fall back into recession have hit prospects for recovery in the ad market, sector giant WPP has said.

The company, owner of advertising giants including Ogilvy & Mather and J Walter Thompson, said that its profits had continued to fall in third quarter of the year.

Setbacks to global economic recovery had left the firm unable to fulfil hopes of showing good growth after the ad decline following last year's September 11 strikes.

"Falling share prices in the summer on both sides of the Atlantic and increasing unemployment has had an impact on consumer confidence suggesting a potential 'double-dip' recession," the firm said.

"As a result, although comparative revenue growth figures have become better since 11 September, the improvement is less than that anticipated previously."

City reaction

Chief executive Sir Martin Sorrell said he did not expect a return to solid advertising growth for a further two years.

"We think 2002 will be better than 2001 in terms of the industry, and 2003 will be better than 2002," Mr Sorrell told news agency Reuters.

"But the differences will be marginal. You will have to wait until 2004 until you see better growth."

WPP shares closed down 3.3% at 435p on Thursday.

Staff cuts

North American operations had been worst hit by the continuing contraction in the global ad market, with revenues flat over the July to September quarter.

UK divisions produced modest growth, with WPP's offices in Continental Europe, Asia Pacific, Africa and the Middle East stronger performers.

By sector, the ad "recession" had most affected public relations and public affairs operations.

The firm has axed 4% of staff this year in an effort to cut costs.