A week in advance 11th - 15th August 2008
By Keith Bowman | 08 Aug, 2008
This coming week in both the UK and the US, corporate second quarter results are winding down and the economic focus is moving towards inflation matters.
Economics
In the UK, the prospects for inflation (rising prices) come back into focus. On Monday, pricing data for industry (during July) is due to be announced in the form of the Producer Price Index (PPI) or as sometimes known, factory gate prices. In June, input prices (raw material costs) on a seasonally adjusted basis rose by 2.1pc from May and by a massive 30.0 percent from a year earlier. This was driven by sharp increases in the prices for crude oil, natural gas and electricity, along with imported ingredients for food production. The following day, broader pricing data is scheduled, with the release of the more general Consumer Price Index (CPI) for July.
The annual CPI inflation figure for June rose by 3.8pc, up on the 3.3pc seen in May and beating economists’ expectations for a 3.6pc increase. Then, finally on the inflation front, the Bank of England (BoE) is scheduled to issue its latest quarterly inflation report on Wednesday. The previous report, issued in May (2008), saw the BoE outlining its forecast for annual CPI to hit the 3.6pc marker come the third quarter, a figure which it has already surpassed. However, the Bank may well point to the recent decline in the price of crude oil (from $145 in July08 to below $120 more recently) as helping to curtail inflation prospects going forward, allowing the Bank to maybe suggest that the current global economic downturn will eventually rein in elevated inflationary pressures.
Over in the USA, inflation or Consumer Price indicators are also due to be released (Thursday). The picture in the USA is similar to that seen in the UK, with energy and food prices pushing up inflation over recent months. However, again like the Bank of England, the US Central Bank will be hoping that a slowing global economy will eventually curtail elevated inflation pressures – with the recent decline in oil prices supporting such hopes.
Companies
On the corporate front, half year/second quarter results from hotel giant InterContinental Hotels Group are due on Tuesday. As with consumer facing companies in general, investor nerves with regards to the outlook have been evident via a 35pc plus decline in the group’s share price over the last 12 months (Source: Sharescope). In recent years, the group has been busy selling hotel assets, returning the majority of cash to shareholders, whilst negotiating a contract from the new property owner to manage the hotel operation. Aimed at boosting returns to shareholders, management have sold the change on the basis that group finances should prove less cyclical going forward.
That said, the group’s exposure to the pressurised US consumer has recently headed investor concerns, with US trading prospects remaining at the top of investors’ agendas. In addition, with the majority of group revenues now generated in US dollars, the company has decided to report its figures in US dollars, starting with the coming results. As for the expected figures, consensus estimates for half year pre-tax profits currently around the $229m mark, a gain of 12.5pc over last year and boosted by currency movements over the period.
The following day, construction and support services group Balfour Beatty is expected to report its half year numbers. The group’s trading update in early July saw trading remaining robust. Management reported buoyant first-half trading and forecast that order intake and trading performance will stay strong for the rest of the year. In recent months the group has continued to win new contracts, with its order book back in May standing close to £12 billion. Ahead of the results, market consensus opinion is currently positive in tone.
Other corporate announcements expected over the course of the week include results and trading updates from the newly formed news and financial data group, Thomson Reuters, engineering and oil services support company Weir Group and information technology concern Logica.
Week Ahead Diary
Half Year Results
Monday – n/a
Tuesday – InterContinental Hotels Group, Thomson Reuters, Weir Group
Wednesday – Balfour Beatty, Interserve
Thursday – Logica
Friday – n/a
Economic Diary
Monday – UK Producer Price Index
Tuesday – UK Inflation data
Wednesday – Bank of England quarterly inflation report
Thursday – US Inflation data
Friday – n/a
Note: This list represents what we believe are the highlights of the coming week and is not an exhaustive list of company announcements or economic events. Source: Digital Look.
