By Jenny Wiggins

in London

Paul Polman, Unilever chief executive, warned of a “protracted” global economic recovery and price deflation as the maker of Lipton tea and Sunsilk shampoo reported strong third-quarter results.

Polman has won the confidence of investors and analysts this year by delivering steady sales and volume growth, leading to a 36 percent rise in Unilever’s stock price over the past six months - more than double the rise in the FTSE 100. Polman on Thursday proved that his changes - which include turning round underperforming brands and stepping up the pace of innovation - were making a difference at Unilever as the company beat analysts’ expectations with underlying sales growth of 3.4 percent and volume growth of 3.6 percent.

James Edwardes Jones, analyst at Execution, said: “Excellent third-quarter results indicate Unilever is doing what it said it would do.”

Analysts were heartened to see volume and sales growth, which was delivered in all regions, was not achieved by cutbacks in marketing spending, with Unilever increasing spending on advertising and promotions by 130bp. But Unilever’s shares fell 1.9 percent to £17.94 in afternoon trading after it said it had been reducing prices.

Polman cautioned further declines in pricing in the fourth quarter would “take a bit of the shine off our organic growth.”

Jim Lawrence, Unilever’s chief financial officer, said underlying prices would rise just 1.5 percent in the full year (compared with a 7.2 percent increase last year), with prices falling between 2 and 3 percent in the fourth quarter.

Analysts said they were not worried by falling prices as long as the company’s volumes continued to improve. Polman also warned of “sluggish market conditions”, noting that consumer confidence in the US had dropped to an eight-month low.

“Employment and consumer confidence are the key drivers of long-term market growth, and unfortunately, unemployment continues to increase in many places and consumer confidence is still low.” Polman said Unilever was coming up with “bigger and better innovations” and rolling them out faster around the world.