A busy period for economic news with the release of inflation, borrowing and retail sales figures will keep UK investors on their toes this week.
Rail commuters face miserable news on fare increases when the latest inflation figures are released tomorrow.
The July result for Retail Prices Index inflation is used in the calculation to set regulated train fares such as season tickets and some longer distance, off peak tickets.
Last July’s negative result for RPI - at minus 1.4 per cent – saw train travellers given a welcome 0.4 per cent dip in season ticket prices in the New Year changes.
But it is a very different story this year, as stubbornly high inflation has seen RPI soar in recent months.
Experts predict the Office for National Statistics (ONS) will reveal RPI remaining at eye-watering levels in July despite a slight easing back to 4.8 per cent from five per cent in June.
But this will be little comfort for commuters, with a formula of RPI plus one per cent used to set fares the following January.
Some analysts even fear there could be a rise in RPI, up to 5.1 per cent, according to Investec Securities.
The official Consumer Prices Index (CPI) measure of inflation is likewise expected to show little sign of falling back to the government’s two per cent target.
Economists believe CPI could ease back only marginally to 3.1 per cent from 3.2 per cent in June.
Tomorrow’s data comes at the start of yet another packed week for economic news.
The latest borrowing figures are also due, while minutes of the August interest rates meeting and official retail sales data will come under intense scrutiny as economic storm clouds gather.
Gloomy forecasts from central bank bosses in the US and UK have sent world markets reeling amid fears over the strength of the recovery.
The US Federal Reserve’s downbeat economic assessment and move to bolster the money supply, coupled with the Bank of England’s warning of a “choppy recovery” just a day later, raised the unsavoury prospect of a double dip recession.
Bank Governor Mervyn King laid bare the threats facing the UK – high inflation and lower-than-expected growth.
Inflation has been running above three per cent throughout 2010 so far, and the bank’s August inflation report suggested it was likely to continue to remain above target next year as well.
Minutes of the bank’s rates meeting, due on Wednesday, are likely to show the first three-way split among policymakers for two years as they wrestle with inflation and growth risks.
Investec expert David Page is forecasting that two members of the Monetary Policy Committee (MPC) voted to increase the quantitative easing programme to aid the stalling recovery in August.
But he believes Andrew Sentance continued to call for a quarter point rise in interest rates as he prioritised the need to rein in inflation.
The minutes are followed on Thursday by both borrowing figures and retail sales data.
With government spending cuts at the forefront of attention, the latest update on Britain’s public finances will be keenly awaited.
Public sector net borrowing is expected to have improved further in July, down to £3.8 billion from £14.5 billion in June, although borrowing is typically lower in July.
Retail sales may disappoint, however, with economists pencilling a drop in growth to 0.3 per cent last month from 0.7 per cent in June as the government’s austerity measures take their toll on consumer confidence.
Second quarter figures from Asda will be watched closely tomorrow for signs of an improvement at the supermarket chain after a tough 2010 so far.
Asda, which is owned by US giant Wal-Mart, suffered its first sales fall for four years in the first quarter and has battled to maintain its market share.
It reported a 0.3 per cent fall in like-for-like sales during the opening three months of the year – dropping for the first time since 2006.
The group’s recently appointed chief executive Andy Clarke is under pressure to revive Asda’s fortunes, but has joined at a difficult time with falling food price inflation hammering sales across the sector.
The second quarter earnings figures are likely to reveal a further impact of this, although Asda has the benefit of a significant non-food offering that may have added some shelter.
But the heat will also be on elsewhere as the latest supermarket share figures from Kantar Worldpanel come out.
Asda has seen a fall in its market share in recent months, down to 16.8 per cent in the 12 weeks to July 11, from 17 per cent a year earlier.
But Mr Clarke has made some bold steps to grow the group since taking on the top post in May.
Within weeks of the promotion, he announced a major deal to snap up the UK arm of discount retailer Netto.
The £778 million takeover will add another 193 stores to its estate, all of which will be renamed under the Asda brand.
The Netto acquisition will boost its smaller format portfolio and help it become an even stronger competitor to closest rival and market leader Tesco.
It is working on a five-year strategy to secure its position as the number two in food and leader in non-food sales, with plans to accelerate openings of smaller stores and launch more Living general merchandise outlets.
Half-year figures from Rok tomorrow come at a tumultuous time for the building services firm.
Rok sent investors rushing for the exit when it revealed an independent review had uncovered “serious failings” in financial controls at its troubled plumbing and heating division.
Shares plunged 42 per cent on the day it broke the news as Rok also warned this would have a material impact on profits.
Exeter-based Rok announced it had suspended its chief financial officer Ashley Martin and handed day-to-day duties to former Amey finance boss David Miller.
It also sought to reassure that trading within its construction and social housing businesses remained strong and that it continued to have adequate headroom on its banking facilities.
This failed to allay fears, with Panmure Gordon quick to slash its recommendation on the firm to sell.
Panmure analyst Andy Brown said: “Questions over financial controls in one area will no doubt create uncertainty about wider group control.
“There’s too much uncertainty.”
Rok had flagged up issues at the plumbing, heating and electrical business (PHE) in April, when it said the division’s performance was being adversely affected by a number of underperforming contracts. It called in business services firm BDO to conduct an independent review after a restructuring and termination of the troublesome contracts failed to revive the business.
Rok had already seen a slump in demand for its work after the property market downturn and recession.
The group was forced to scale back its exposure to new build construction business, which left last year’s interim underlying pre-tax profits 39 per cent lower at £7.6 million.
The city was hoping for a revival this year as Rok’s market recovered, but the woes at its PHE division have seen estimates slashed.
Many now expect profits of around £5.7 million for the first six months of its year, down by a quarter.
The full-year impact is expected to be even more pronounced – with Mr Brown pencilling in a 39 per cent plunge to around £12.5 million.
Car dealership Lookers has whetted the market’s appetite for bumper interim results when it reports on Wednesday.
The Manchester-based company said it was seeing a boom in demand for spare parts – a trend it has been able to capitalise on thanks to its burgeoning parts distribution business.
The division, which works with 2,500 suppliers through 20 UK sites, has helped to offset a tough new and used car sales market as drivers seek to maintain their existing motors.
Its profits cheer follows an earlier upgrade at the beginning of May as the group has succeeded so far in shrugging off difficult trading conditions – as well as the end of the government’s cash-for-bangers scheme, which propped up the car market during the worst of the recession.
Analysts have lifted pre-tax profit forecasts for the year as a whole to £32.1 million – up from the £28.3 million seen in 2009.
At the half-year stage, Panmure Gordon analysts are predicting Lookers to post a leap in underlying profits to £21.5 million from £17.6 million a year earlier.
They said the spare-parts arm would also help shield Lookers from any further shocks in the car market, which is susceptible to wider economic troubles.
“Even if we do get a double dip recession, we believe Lookers will fare better than most given the proven resilience of its parts operation.”
Lookers employs 5,500 staff and has 122 franchised dealerships selling 32 marques, including Vauxhall and Ford.
The market will be looking for news on recent trading from Cineworld after it revealed the World Cup proved a major distraction for cinemagoers.
The cinema chain’s revenue growth slumped during the football tournament, to 3.7 per cent for the 26 weeks to July 1 against 13.9 per cent during the first 18 weeks.
But Cineworld’s half-year figures on Thursday will be helped by the success of movies such as Avatar and Alice in Wonderland in the first quarter.
The group was also hopeful of a bounce back in demand in the second half thanks to a “promising” line-up of 3D films during the school holidays.
The release of Shrek Forever After, Toy Story 3 and the next instalment of The Twilight Saga are likely to have helped draw back consumers after the World Cup, while demand may also have been boosted by the slightly cooler weather in recent weeks.
Many analysts believe Cineworld’s outlook is positive, given the revival in the cinema industry on the back of 3D, and are pencilling in decent earnings growth over the next few years.
KBC Peel Hunt believes the group will report underlying pre-tax profits up eight per cent at £34.2 million.
However, wider economic woes and spending cuts pose a threat to consumer spending and advertising revenues.
This is already apparent in retail sales at its 78 cinemas across the UK, which fell 3.2 per cent in the first half.
But it is driving sales in other areas, such as through 3-D glasses and games machine income and is confident in its own outlook, with moves to expand its estate, including a 25 year lease at the O2 centre in London.