The Week Ahead: US CPI; UK Q2 GDP; Disney, Deliveroo, AMC results

Here’s our pick of the coming week’s key economic and company events:

1) China trade balance (July) – 08/08: With headline inflation slowing further in June to 0% and PPI slipping further into negative territory in June to -5.4%, this week’s inflation as well as trade numbers are unlikely to make uncomfortable reading for Chinese authorities. In June the trade numbers showed that economic activity slowed further. Exports fell by -12.4% from a year ago, missing expectations by a large margin, and their biggest decline since 2020, while imports also declined more than expected, by -6.8%, further reinforcing concerns about deflation. On the more positive side, expectations of stronger stimulus by Chinese authorities have been increasing over the past few days, especially since recent PMI numbers have shown little sign of a pickup, with the latest July numbers showing that manufacturing remains in contraction.                  

2) US CPI (July) – 10/08: US inflation has fallen from peak of 9.1% in June last year, slowing to 3% last month, while core CPI slowed to 4.8%, a much softer number than expected. With the Federal Reserve having hiked rates by another 25bps in July, there is a sense that further rate hikes beyond July could be a big ask, especially with PPI inflation on the cusp of going negative. That said, anyone expecting a straight-line process when it comes to slowing inflation could find that further weakness towards 2% might not be such a straightforward process. Expectations for July are for headline CPI to tick higher to 3.2%, while core prices could slow further to 4.7%. Any indication that we might be at a short-term base when it comes to headline inflation could prompt some concern that the Fed might think about another rate hike at its September meeting, with the next key focus likely to be on the annual Jackson Hole Symposium at the end of the month.   

3) UK Q2 GDP – 11/08: Having eked out 0.1% growth in Q1 of this year, this week’s Q2 numbers ought to show an improvement on the previous two quarters for the UK economy. Contrary to a lot of expectations economic activity has managed to hold up reasonably well despite soaring inflation which has weighed on demand, and especially on the more discretionary areas of the UK economy. PMIs have held up reasonably well throughout the quarter even as they have weakened into the summer. Retail sales have been positive every month during Q2, rising by 0.5%, 0.1% and 0.7% respectively. Consumer spending has also been helped by lower fuel pump prices, and with unemployment levels still at relatively low levels and wage growth currently above 7%, this week’s Q2 GDP numbers could be as good as it gets for a while. With interest rates now at their highest levels for over 15 years and more and more fixed rate mortgages set to get refinanced in the coming months, the second half of the year for the UK economy could well be a lot more challenging.     

4) Persimmon half-year results – 10/08: Back in July Persimmon shares hit their lowest levels in 10 years as concern over higher interest rates and lower demand weighed on the outlook for the UK’s house building sector. The unexpected decision by the Bank of England to hike rates by 50bps in June was the catalyst for this move to multi-year lows. In Q1 Persimmon reported a 42% fall in home completions to 1,136 from a year ago. Despite the disappointing update the house builder said it was still confident of meeting its full-year targets. It is clear that the rise in interest rates is starting to hit demand for housing. However, while the slowdown from 12 months ago appears stark, the trend from the end of last year, when the net sales rate was 0.30 per outlet, points to a pickup. Net private sales per outlet fell 37% to 0.62, however this was up from 0.30% at the end of last year, while forward sales were down 30% to £1.7bn. Half-year revenue is expected to see a decline to £1.11bn, with average selling prices falling to £245,000.    

5) Deliveroo half-year results – 10/08: The food delivery company has seen strong gains so far this year. Having spent most of last year flirting with the 80p level, since March the shares have started to gain traction, pushing up to one-year highs last month. In April the company reported a 4% increase in revenues to £512m, while total GTV rose to £1.75bn. Despite higher revenues, total orders fell by 9% to 72.1bn. Deliveroo maintained its full-year guidance of low- to mid-single-digit GTV growth with adjusted EBITDA expected to be in the region of between £20m and £50m, weighted towards the second half of the year. For Q2, revenues are expected to match Q1 with half-year revenue expected to rise above £1bn, with GTV of £3.5bn.  

6) Disney Q3 results – 09/08: If Disney’s Q2 numbers were any guide the Disney+ streaming operation appears to have hit a critical mass when it comes to subscriber additions, losing 4m over the quarter. Since that update the shares have been on a slow slide lower, with the March 2020 lows almost within touching distance. Revenues for the quarter were in line with expectations at $21.81bn, due to higher prices which translated into a lower-than-expected operating loss of $200m for the direct-to-consumer business, and a wider loss of $659m across all platforms. While the increase in prices at Disney+ appears to have prompted some cancellations, this has been offset by higher subscription revenue on a per-user basis, although its Hotstar business has struggled, seeing a decline in ARPS. The theme park business saw revenues increase 17% to $7.8bn, helped by the reopening of its Shanghai resort as Covid restrictions there got relaxed.  The company also said it was on course to deliver $5.5bn in cost savings. Q3 revenues are expected to come in at $22.5bn while Disney+ is expected to lose another 3.2m subscribers. Profits are expected to come in at $0.99 a share.

7) Rivian Q2 results – 08/08: Rivian shares have undergone a significant turnaround since the company published its Q1 results back in May. The catalyst wasn’t those numbers but the announcement it was starting deliveries to Amazon for its European operations in Germany. At the end of last year Rivian said it expects to double output to 50,000 vehicles, below what many had been expecting, while narrowing its losses to $4.3bn. The company said it expected to spend $2bn on future capex at its plants in Normal, Illinois and in Georgia. In May the electric car maker said it was still on track to meet its end-of-year production target with Q1 revenue coming in at $661m, while losses were better than expected at $1.25 a share. In total 7,946 vehicles were delivered in Q1. For Q2 Rivian is expected to have produced 13,992 vehicles with quarterly revenue expected to push up to a record $1bn. 

8) AMC Entertainment Q2 results – 08/08: The former meme stock has continued to struggle under the burden of its debt load. AMC was blocked in July from issuing more shares, while the cinema chain’s footfall has not yet returned to pre-pandemic levels. At the same time CEO Adam Arons has made some questionable decisions in a bid to diversify revenue streams, acquiring a 22% stake in Hycroft Mining last year. AMC was recently forced to write down the value of its stake. Since the lifting of lockdown restrictions attendance at cinemas has got nowhere near the levels it was in 2019, when AMC saw nearly 97m people pass through its doors in Q2 of that year. When the company reported in Q1 movie attendance was at 47.6m with the US accounting for 32.3m of that total. This is well over half the level in the same quarter pre-Covid. The hope for Q2 is that Barbie, Oppenheimer, the new Indiana Jones film, and Guardians of the Galaxy Volume 3 will have prompted a significant uptick. Expectations are for Q2 revenue of $1.27bn, with 63.2m people expected through its door, and 48.2m of them from its US markets. Losses are expected to come in at $0.04 a share.          

9) Paramount Global Q2 results – 07/08: When Paramount reported its Q1 numbers in May the shares fell sharply. The company slashed its dividend to $0.05 a share as quarterly revenue fell to $7.26bn, resulting in a loss of $1.12bn after taking into account an impairment charge of $1.67bn following the merger of Paramount+ and Showtime. The shares hit three-year lows back in May before rebounding. The Q1 numbers showed that the film division saw a decline of 6% in its revenue stream, while TV media saw an 8% decline to $5.2bn. The only plus point was that direct-to-consumer revenues increased 39% to $1.5bn. Paramount+ saw a rise of 4.1m subscribers to 60m. Paramount also said it was looking to restart the sale process for Simon & Schuster which it is hoped would be concluded by year-end. For Q2, expectations are for revenues to come in at $7.4bn while net subscriptions are expected to rise by 1.14m. Profits are expected to come in flat.

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