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Christmas spending focus as inflation figures released

WITH few corporate updates expected next week, attention will switch to the economy and the spending power of consumers in the run-up to Christmas.

Inflation is expected to dip in figures released on Tuesday, but economists see it as a temporary reprieve as the cost of living is set to rise in the months ahead.

The consumer price index (CPI) is forecast to have fallen slightly to 2.6% in November, from 2.7% in October, in figures from the Office for National Statistics (ONS).

The impact of energy bill increases from supplier SSE will not be felt so sharply because of steeper utility bill rises in November last year but, with further hikes from other providers due in the months ahead, CPI inflation is predicted to peak at 3.5% by mid-2013.

And, in a busy week for economic releases, public finance figures are forecast to bring some cheer to the Chancellor and reveal a drop in borrowing in November, while retail sales for the same month will receive a pre-Christmas boost and rise by around 0.3%.

The rate of inflation unexpectedly shot up in October from a three-year low of 2.2% in September to 2.7% – described by one economist as a "nasty surprise".

Resurgent inflation will come as a blow to pensioners and savers, who have seen their income hit hard by rock-bottom interest rates.

It will likely also fuel speculation that the Bank of England will hold off from taking further action under its economy-boosting quantitative easing (QE) programme.

Demand for temporary power in the US following superstorm Sandy should have helped Olympics contractor Aggreko in the wake of a profits warning.

It received a £59 million boost from its London 2012 contract, but said in October that its overall results were impacted by unfavourable currency movements and as bad debt provisions increased.

Since then, Aggreko has won work in the US where the superstorm knocked out power supplies in many parts of New York and along the east coast.

While storm related revenues are not an unusual occurrence for Aggreko, Seymour Pierce analyst Caroline de La Soujeole said events in the US could provide a 2% boost to pre-tax forecasts for its year end.

The company is due to post another trading update today. The City currently predicts the group will post full-year pre-tax profits of £364.8m in 2012, up from £307.1m in 2011.

The Glasgow-based group, which also provided power generation and temperature control systems at events such as the football World Cup and US Superbowl, said in October that underlying revenues rose 13% in the third quarter, helped by the Olympics work.

Aggreko's local division, which handled the Olympics, delivered a better-than-expected performance in the quarter, with underlying revenues up 11%. The local business operates from around 133 service centres in 31 countries and rents out products ranging from small generators to large cooling plants.

The return of former Loose Women presenter Coleen Nolan as the face of Park's Christmas savings advert should help drive a strong performance in its interim results tomorrow.

Analysts at Arden Partners predict the group will see a jump in pre-tax profits to £9.5m for the year to next March, up from £8.6m a year earlier.

Park, which sells vouchers, hampers and other gift products on a 45-week prepaid instalment plan in time for Christmas, said in September that savings orders for Christmas were 6% ahead of the same time last year. It also said corporate sales were doing well, showing 13% year-on-year growth.

Ben Thefaut, analyst at Arden Partners, said the group's "flexecash" pre-paid card, which can be used at 40 retailers, including M&S, Argos and Boots, were being taken up by both consumer and corporate customers.

He said: "Pre-paid cards are the most common gift in the US and this market is growing in the UK."

The group also signed a deal with the TopCashBack website, which gives customers a percentage of the cost of a purchase into a cashback account. Customers will be able to receive their bonus on Park Group's flexecash card.

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