Has UK inflation peaked and will Redrow PLC and Dunelm Group PLC issue profit warnings on Wednesday?

Wednesday’s new agenda in London will be dominated by the start of the Queen’s statehood at Westminster Hall, but for the city there should be a nearly full schedule of events, including data on the UK inflation and business news.

Currently at a 40-year high of 10.1% and expected to continue to rise, inflation will be a big story.

The Bank of England has forecast the consumer price index (CPI) to peak at 13% in the fourth quarter of 2022, with some economists also predicting that the CPI could then reach an eventual peak of 18% or 20% in beginning of next year.

However, these forecasts were made on the basis of the energy price cap before new Prime Minister Liz Truss froze energy bills at £2,500.

As such, economists say inflation is likely to peak lower, with some like Barclays saying it may have peaked already.

This could help the economy avoid a long recession, but should not prevent further potential interest rate hikes over the next two years, as it is expected to be difficult for inflation to return to the normal.

The CPI for August is estimated to have remained 10.1% higher than a year ago, with a monthly increase of 0.6% since July.

Some economists believe it will have fallen to around 9.9% as the contribution from gasoline prices declines, only partly due to a further rise in food prices.

Core CPI inflation, which excludes food and fuel, is expected to have held steady at 6.2% or possibly climbed to 6.3% depending on who collected the data.

Producer prices will also be scrutinized for future movements in the CPI, with input prices expected to have risen 0.3% month-on-month and output prices 0.9%. Official house price inflation will also be released by the Office for National Statistics.

In company news, there are pencil updates from homebuilder Redrow PLC (LSE:RDW) and retail chain Dunelm Group PLC.

For Redrow, which we haven’t heard from since warning investors in April that it was planning an additional £164m provision for surfacing repairs, analysts expect 5,747 completions of houses for the year to the end of June.

Average sale prices are expected to have increased by almost 8% to £364,000, representing total sales of £2.1 billion.

Investors and analysts will focus on demand trends since June, prospects for the new year and the impact of planning delays, said UBS, which expects the sell rate is likely to fall. in the New Year due to a lack of available stock and normalization of trading (in line with peers).

“We expect a slowdown going forward and cost inflation to remain high.”

Dunelm has already released its year-end business update, so key sales and pre-tax profit numbers shouldn’t come as too much of a surprise, UBS said.

The main things analysts will be looking for are operating cost inflation over the past year and any guidance for the new year, as well as general guidance for the year ahead on revenue and profit margins, as well as “any color on current trading and any other challenges on the horizon”.

UBS added: “We believe the market is anticipating a significant decline in volumes, as industry commentary continues to appear weak on furniture. We believe Dunelm has a strong product offering at multiple price points, a innovative pricing architecture and seasonal products that can help the top line year-round.”

Important announcements scheduled for Wednesday

Interims: Advanced Medical Solutions Group, Artisanal Spirits Company PLC, Blackbird PLC, Central Asia Metals PLC, Epwin Group PLC, Glenveagh Properties PLC, Itaconix PLC, Tullow Oil PLC

Finals: Daytime group automaton, Dunelm group automaton, ITM Power automaton, Redrow automaton

AGM: Augmentum Fintech PLC, B90 Holdings PLC, Best of the Best PLC, Dev Clever Holdings PLC, Fulcrum Utility Services Limited, Grafenia Plc, Hornby PLC, Lansdowne Oil & Gas, Marlowe PLC, Purplebricks Group PLC, Sutton Harbor Group PLC

Economic Updates: Consumer Price Index (UK), Producer Price Index (UK), Retail Price Index (UK), MBA Mortgage Applications (US), Consumer Price Index production (US), crude oil inventories (US)

American profits: BRP Inc, Li-Cycle Holdings Corp

About Gertrude H. Kerr

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