Bellwethers author Chris Williams, of NTC Research said: Marketing and advertising executives are entering 2004 in the most optimistic mood since the height of the dotcom boom.

It is particularly encouraging that budget increases are being driven primarily by the reality of rising profits rather than just by improved business confidence.

The snapshot covered the final three months of last year and builds on improved third quarter figures for 2003.

Over the whole year, the IPA reports that the sharpest rises in actual spend were recorded for direct marketing and sales promotion pieces.

In contrast, media adspend remained static in real terms compared to 2002, although this is the largest slice of total advertising expenditure, representing 35% of the total spend on advertising.

Public relations and market research account for 28% of the total spend, direct marketing 23% and sales promotion 14% of 2003 total marketing expenditure.

More than half of the 250 companies that comprise the Bellwether report panel set new annual budgets in Q3 and Q4 last year. Of these, more than half reported that budgets had been set higher than actual spend in 2003.

In contrast, lower budgets were reported by only one-in-five companies.

Sir Martin Sorrell, chief executive of ad agency WPP said: These UK trends are not surprising given that US Q4 corporate earnings look as though they will be up by 25%.

Corporate profitability is improving, but up to now mainly as a result of cost reductions. Perhaps now the focus is switching to top line growth and advertising and services spending is rising as a result.

by Tony Brown