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The Week ahead...

The attention will once again turn to the DIY Multiples next week as Kingfisher publishes its results on Thursday. The world's third-largest home improvement group has copied the banks and "stress-tested" its business, drawing up contingency plans for nightmare scenarios in the eurozone, from which it obtains about half of its revenues.

The general economic platform for next week is even busier than the corporate news.

The January housing market survey from the Royal Institution of Chartered Surveyors (RICS), out overnight Monday/Tuesday, will indicate whether or not slightly improved housing market activity at the end of 2011 extended into the start of 2012.

"While there has hardly been a major step up in housing market activity and it remains very weak compared to long-term norms, there was nevertheless a modest pick-up in mortgage approvals and levels of sales transactions late in 2011," pointed out Howard Archer, chief UK and European economist at IHS Global Insight.

He expects the RICS survey to reveal that the balance of surveyors reporting that house prices rose over the previous three months edged back to -18% in January after rising to -16% in December from -17% in November and -24% in October.

Tuesday sees the publication of January's consumer price inflation (CPI) data. The British Retail Consortium (BRC) has already reported that overall annual shop price inflation moderated to a 22-month low of 1.4% in January from 1.7% in December. While Philip Shaw, economist at Investec assumes that the CPI will fall to a 14-month low of 3.4% in January after dipping to 4.2% in December, Archer predicts that the figure will be 3.6%.

"Inflation is expected to have fallen appreciably further in January as a result of much of the impact of the January 2011 VAT increase from 17.5% to 20.0% dropping out," Archer said. "In addition, the year-on-year increase in oil, commodity and many food prices is likely to have eased as they were rising appreciably in late-2010/early-2011."

Retail sales volume data will be out at the end of the week.

The Office for National Statistics (ONS) measure of retail sales volumes rose by 0.7% on the month in December. Moreover, the series has exhibited a degree of unexpected buoyancy over the past three months, with sales volumes increasing by 1.1%, their fastest pace since August 2010.

Evidence from surveys for January has been mixed: While the John Lewis weekly numbers have been very robust, the CBI distributive trades survey disappointed and the British Retail Consortium (BRC) sales monitor showed a decent 2.1% annual sales value growth.

"In the absence of a uniform steer from the various anecdotal pointers, we are left pondering whether the recent run of buoyant numbers is likely to be maintained," voiced Shaw. "We take the view that this is unlikely and accordingly we are looking for 0.4% decline in sales on the month."

Archer is also expecting a decline, albeit a smaller one at 0.3%, stressing that it is hard to be optimistic over the prospects for consumer spending in the early months of 2012 "at least".

And last but not least, Nationwide will publish its January consumer confidence data.

UK consumer confidence continued to languish close to record lows in December with Nationwide's survey dropping to 38 from 40 in November, just two points clear of October's record low of 36. Cadman predicts that the index will be pushed up by five points to 43 in January, driven by better sentiment on the euro crisis and a narrowing gap between earnings growth and inflation.

Source: Darshini Shah - Interactive Investor

10 February 2012
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