Electricity hikes spark inflation surge to fresh high

Wall Street’s biggest hitters will highlight the pain of this summer’s economic turmoil over the next few days, while the rising cost of living at home will come under the spotlight.

Inflation figures, due tomorrow, will show that September was a tough month for shoppers, with the consumer price index (CPI) tipped to touch a three-year high.

The chief influence on inflation, which is forecast to come in at about 5 per cent after reaching 4.5 per cent in August, was rising utility bills after price hikes from two major providers, Scottish & Southern Energy and E.ON, during the month.

Tuesday will also see US banking giant Goldman Sachs unveil a dismal set of third-quarter results, underlining the pressures recent market turmoil and economic uncertainty have had on the sector. The figures, which come amid a flurry of US bank updates, cover a period of great market volatility triggered by global recession fears, which has hit all major investment banks.

Back home, BSkyB will be hoping a strong set of first-quarter results will draw attention away from the controversy surrounding the satellite broadcaster’s chairman, James Murdoch.

Paul Richards, an analyst at brokerage Numis, expects revenues to grow 9 per cent to £1.7 billion, while underlying earnings should be up 14 per cent to £290 million. But Richards has also forecast net customer additions to slow to about 40,000, compare to 96,000 added last year, as the clampdown on household incomes tightens. He has forecast a slowdown in sales growth as the company has decided against a September price rise.

Argos – the 750-store catalogue chain – is expected to have made just £1m in half-year profits after sales tumbled nearly 8 per cent. The retailer, among the most recognised brands on the high street, has been one of the biggest casualties of the consumer spending squeeze.

Its owner, Home Retail Group, which also trades as Homebase, is forecast to report a 70 per cent plunge in pre-tax profits to £30m for the six months to August, compared to £103m the previous year.

Department store chain Debenhams should show profit growth on Thursday after a summer of discounts and promotions helped boost its market share. The group, which has 169 stores in the UK, Ireland and Denmark, turned around falling like-for-like revenues over the summer after it brought its sale forward by five days.

The retailer cheered the market in September when it forecast higher-than-expected profits – a rare move in a sector dominated by profit warnings as the consumer spending squeeze tightens its grip.

In its last update, Debenhams did not provide UK sales figures but did give statistics for its Magasin du Nord chain in Denmark – suggesting the UK performance may have been weaker.

The heavy discounting and competitive conditions may have hit the group’s gross margins for the full year, but the additional sales generated have more than made up for this loss.

Leisure giant Whitbread will reveal a boost to its half-year profits, driven by a strong performance at coffee chain Costa.

Broker Panmure Gordon forecasts pre-tax profits of £162.9m in the first half of the year, up from £151.8m last year, after an aggressive expansion strategy at Costa drove a strong sales performance.

Costa, which has 1,295 stores in the UK and 1,986 worldwide, saw like- for-like sales growth of 6.6 per cent in the 24 weeks to 18 August and a 25 per cent lift in sales including store openings.

The surge in total sales is due to the chain’s aggressive expansion plans, which have seen 145 outlets open in the first half with a further 155 planned for the rest of the financial year.

Elsewhere in the Whitbread business, its chain of budget hotels, Premier Inn, has continued to deliver with 5 per cent like-for-like sales growth over the summer.

Simon French, an analyst at Panmure Gordon, said Costa is growing at four times the rate of the group’s hotel and restaurants division.