Tuesday preview: Spotlight on UK consumer price inflation, JD Sports results

Rising UK inflation and stuttering wage growth data are the big economic issues this week, with the two forces recently beginning to combine in a pincer squeeze on households' real purchasing power, beginning with consumer price inflation on Tuesday.

Tuesday is all about prices, with the Office for National Statistics publish the consumer price index and its cousins the focused on retail and producer prices at 0930 BST, a day before employment and weekly earnings data.

Core CPI rose 2% in February compared to a year ago, while headline CPI overshot the Bank of England’s 2% target with a rapid jump to 2.3% year-on-year, up 0.7% month-on-month.

For March the market consensus is for CPI inflation to hold at that level, or even ease to 2.2%, with the month-on-month rate moderating to 0.3%.

Economists at HSBC expected inflation pressures to ease to 2.2%, with oil and petrol prices having fallen over the month and as Easter fell in March in 2016 but will be in April this year.

With utility prices rises starting to feed into the index this month and continue into the spring, alongside a tax increases for the likes of prescriptions and dental charges from April, RBC Capital Markets said it still expected inflation to rise in the coming months to a peak of 3%.

The ONS’s new preferred measure of inflation, CPIH, which includes owner-occupiers’ housing costs, is expected to hold at 2.3% y/y.

Mark Carney and his band of BoE rate-setters have promised to look through an overshoot in inflation but only if second round effects remain under control.

"Sterling is therefore likely to respond particularly sharply to a larger than expected increase in either inflation or wage growth in this week’s data," said Ranko Berich, head of market analysis at Monex Europe.

“The pound has mostly ignored the beginning of the Brexit process, and some lukewarm economic data in recent weeks, which can be mainly attributed to the robust state of the domestic labour market and rising inflationary pressure. Despite the BoE’s aggressive post-referendum easing measures, the UK sovereign curve still offers comfortably higher yields than its European equivalents. It appears there is room for this spread to further widen and for sterling to benefit if a bigger than expected inflation overshoot develops, especially if this begins to filter through to wage negotiations.”

Eurozone industrial production

Having increased 0.9% m/m in January following a December decline of 1.2%, seasonally adjusted Eurozone industrial production is forecast to rise just 0.1%.

Industrial production data have been very volatile recently, HSBC noted, in contrast to relentlessly strong survey data since the turn of the year, such as manufacturing PMI reaching a 72-month high in February thanks to solid new orders growth.

"Signs of capacity constraints continue to be reflected as the stock of finished goods rose, and delivery times fell to the lowest level in almost 6 years. So far hard data has been lagging behind, however, which leaves us unconvinced that industrial production will improve significantly in February."

Good sports

JD Sports Fashions results for the year to end-February are forecast to include a strong rise in profit before tax.

In a trading update in January, the trainers and leisure-wear retailer said headline profit before tax in will exceed market expectations of £200m by up to 15%.

The FSTE 250-listed group, which owns chains including Size? and Millets, said it achieved like-for-like (LFL) sales growth of 10% and had kept up the momentum in the second half.

“We expect to see continued strength in LFLs, though not necessarily at the 10% level reported in the first half (we model mid- to high single digits for fiscal year 2017),” Barclays said, adding that commentary about progress on the group’s store roll-out strategy will be important.

Tuesday April 11

INTERIMS
APC Technology Group, Applied Graphene Materials , Egdon Resources

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Industrial Production (EU) (10:00)

FINALS
JD Sports Fashion, Vedanta Resources

ANNUAL REPORT
Yu Group

SPECIAL DIVIDEND PAYMENT DATE
Ferrexpo

AGMS
Law Debenture Corp., Porvair

TRADING ANNOUNCEMENTS
Ramsdens Holdings

UK ECONOMIC ANNOUNCEMENTS
Producer Price Index (09:30)
Retail Price Index (09:30)

Q1
XP Power Ltd. (DI)