The Bank of England’s latest quarterly inflation report will provide the economic highlight this week, while bookmaker Ladbrokes and retailer Thorntons are among those due to report on the London market.
Inflation will take centre stage among the week’s economic data as the Bank of England’s quarterly report comes a day after official figures for January’s cost of living on Tuesday.
Inflation unexpectedly shot up to 3.7% in December, from 3.3% in November, to its highest level since April, the Office for National Statistics (ONS) said. Inflation expectations driven by the January VAT hike and soaring oil and food prices, were all to blame.
The surge piled pressure on the Bank of England to raise interest rates to curb the soaring consumer prices index rate of inflation.
But just as the hawkish members of the Monetary Policy Committee (MPC) – such as Andrew Sentance – were looking close to getting their way, the ONS revealed the economy went into shock decline in the final three months of 2010 by 0.5%.
The figures highlighted the fragile position the economy has found itself in - teetering close to a period of so-called stagflation, when sluggish growth and high unemployment combine with soaring prices.
Possibly considering the weaker than expected fourth quarter GDP figures, the MPC held its nerve and kept rates at their 0.5% historic low for a 23rd consecutive month.
Further pressure is expected from January’s CPI figures, as analysts expect the rate to surge again to around 4.1%. However, the Bank has previously stated it expects inflation to move towards 5% in the coming year.
So analysts will be looking closely at the latest inflation report on Wednesday and listening keenly to what Mervyn King has to say in his speech to determine when the MPC believes inflation will return to the 2% target.
Mark Cliffe, chief economist at ING Group, said while the Bank may come under pressure to lift rates, the inflation threat is exaggerated.
He said tax rises were having a temporary impact, while food and energy prices should peak this year and wage inflation will be subdued as unemployment is expected to rise. “Interest rates are unlikely to rise as quickly as expected,” he added.
Hovis-to-Mr Kipling firm Premier Foods is expected to reveal a decline in profits on Tuesday as the firm battles intense competition in the grocery market.
The UK’s biggest food manufacturer, whose shares nearly halved in value in 2010, is forecast to report a 2% decline in trading profits to £303m (€358m) in the year, according to analysts.
The results are expected to reveal an improvement on the first half of the year when trading profits declined by 6%.
The past year has seen the company, which owns brands including Sharwood’s, Bisto and Ambrosia, struggle to pass on the rising cost of ingredients to its supermarket customers in an increasingly competitive market.
The company recently sold some of its best known brands in a bid to drive down its debt mountain, which ballooned to £1.4bn (€1.65bn) after a buying spree that saw it snap up Hovis owner RHM and the UK arm of Campbell’s soups.
Its meat free business, which includes Quorn and Cauldron, was sold to a private equity consortium for £205m (€242m) in January.
Household brands Crosse & Blackwell and Fray Bentos were sold along with its canned grocery operation to food and drinks group Princes in a deal worth £182m (€215m).
The disposals, which will not affect the 2010 figures, have driven Premier’s debts down to below £1bn (€1.2bn), which Julian Hardwick, an analyst at Royal Bank of Scotland, said left the company with a balance sheet that investors would see as comfortable.
He also expects Premier’s sales to show a drop of 3.3% in 2010, which is an improvement on the 4.4% decline reported in the first three quarters.
The St Albans-based firm was involved in a pricing spat with the UK’s biggest supermarket group Tesco which refused to accept price rises on some of its Hovis bread products during the final quarter.
Premier said it needed to put up costs after the price of wheat soared by up to 50%.
More than 99% of households bought a Premier Foods brand last year, according to the company’s website.
Chocolatier Thorntons is likely to reveal how much the snow chaos in December wiped off its profits when it updates the market with its half-year results on Wednesday.
The retailer said the Arctic weather cost it £3.5m (€4.1m) in lost sales in the key Christmas trading period, as shoppers opted to stay at home rather than brave icy high streets to reach its stores, although it gave no estimate for how badly profits were hit.