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 US 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 has risen just 8.5 per cent this year, compared with with a 20.5 per cent increase in the DJ Stoxx 600 overall.

And technology is up 16.4 per cent, also less than the broader market.

The US 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 has seen signs of recovery and expects stabilisation or a slight improvement in business conditions. UK recruitment agency Michael Page 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.

Ads, for example, have been migrating from newspapers and magazines to cheaper online sites, a move the recession has only speed up and which will not be wholly reversed as advertisers have by now discovered other benefits of Web campaigns.

Business travel, one of the first casualties of corporate budget cuts, is extremely unlikely to return to pre-recession levels. Airline industry body IATA said last week it was still too early to talk about a recovery.

The big trade fairs organised by media groups like Reed Elsevier or UBM are no longer a must for everyone in the business, and salespeople have now found other methods such as videoconferencing to connect with clients.

"In light of the current economic situation and with the rise in fuel prices, videoconferencing has become the most viable option to run businesses which involves a lot of travelling," market research firm Evalueserve wrote recently.

"It has proved to give a good ROI, save the environment, ensure increased collaboration and faster dispute resolution."

Some Growth
Recently, ad agencies, broadcasters and newspapers have reported steadier spending, albeit at depressed levels. CBS Chief Executive Les Moonves said last week: "It is clear that there is some growth in the advertising market."

Results from top media groups News Corp, Time Warner and Viacom this week will help determine whether this is a sustainable trend.

Google's revenue, almost solely derived from ads, rose 8.5 per cent last quarter, while Interpublic's chief executive said recently companies had started inviting advertising and media agencies back to pitch for campaigns.

French food group Danone last month credited a step-up in advertising for its fast recovery in fresh dairy sales volumes in the third quarter.

And Pernod's CEO said Absolut vodka would benefit from a second advertising wave.

Operating expenses that can be justified in terms of efficiency gains are also likely to pick up early on.

Cloud computing, until recently considered a hyped concept years away from maturity, is rapidly gaining popularity as companies grasp the cost benefits of allowing others to host their data and applications, which they then access via the Web.

And the launch last week by Microsoft of a new version of its Windows system software that runs nine of of 10 of the world's personal computers may spark a long-overdue wave of computer upgrades by companies.

UBS's last quarterly survey of chief information officers found that they forecast on average a 0.7 per cent year on year decline in their IT budgets for the next 12 months, compared with a 2.1 per cent forecast decline a quarter earlier.

Top of their hardware shopping lists were computer servers, which UBS said was likely due to a move to cloud computing, while 24 per cent said they may move to Windows 7 in 2010, more than the 6 per cent who upgraded to the previous Vista system.

"Discretionary spending remains pressured, while services that lower costs and provide quick return on investment take priority," the UBS report said.

ING's Williams says: "We find tech probably the most interesting. But the tech sector in Europe is relatively small and relatively heterogeneous, so it's a matter of picking the right stocks."