Wednesday preview: UK unemployment eyed flat, Sainsbury's plunging profits

Wednesday will see a official UK unemployment reading as well as a smattering of UK corporate updates, including a big decline in profits at Sainsbury's.

The UK Labour Force Survey for September will be delivered at 0930 GMT, following on from the last International Labour Organization (ILO) measure of unemployment of 5.4% three months to August, which was a post-crisis low.

The consensus forecast among economists is for unemployment rate to remain at 5.4%, while headline wage growth is expected to rise to 3.2%.

Economist Vicky Redwood at Capital Economics expects the data to confirm that the second quarter’s employment falls "were a temporary blip" after increase in employment rose in the previous three-month reading.

"We expect the recent resumption of employment growth will continue in coming months, as suggested by employment intention surveys. And we think unemployment fell enough in September to bring the three-month average ILO unemployment rate down to 5.3%."

Former colleague Sam Tombs, now at Pantheon Research, predicts the small rises in the number of unemployment benefit claimants in August and September indicate the unemployment rate will have held steady at 5.4%.

"Nonetheless, the continued strength of the job surveys suggests the rate will fall further soon."

Meanwhile, he pencilled in an increase in average weekly wages to 3.2% in September from 3.0% in August, while the measure excluding bonuses likely weakened, perhaps from 2.8% to 2.6%.

"The MPC fully anticipates this, however, and the continued weakness of productivity signals that even modest pay growth will be sufficient to drag inflation back to its target by late 2016."

Also pinned to the macroeconomic calendar are China retail sales and industrial output, due at 0530 GMT.

Capital Economics noted that with recent Caixin’s manufacturing PMI surveys suggesting improved manufacturing momentum in October, industrial production is likely to have grown slightly.

On Sainsbury's the consensus forecast is for a big fall in pre-tax profit to £300m, on an 11% decline in revenue to £12.4bn, with adjusted earnings per share down by almost a fifth to 11.5p.

In its preview, Goldman Sachs forecast continued margin pressure driven by price investments and negative leverage, but thinks underlying profit before tax will only fall 17% to £316m.

"Structural pressures mean we believe traditional UK grocers are playing a negative sum game. We see this driving a step up in competition, which is likely to require Sainsbury to invest further margin to protect growth."

It sees key upside risks being a further acceleration of cost cuts, a slowdown in channel shifts away from large stores and a material uptick in input cost inflation.

Also publishing results in the utility sector is SSE. Consensus estimates compiled by Bloomberg is for adjusted EPS of 0.42.5p on sales of £12.5bn.

Wednesday 11 November

UK ECONOMIC ANNOUNCEMENTS
Claimant Count Rate (09:30)
Unemployment Rate (09:30)

INTERIMS
First Derivatives, Flybe Group, Great Portland Estates, Real Good Food, Sainsbury's, Sophos, SSE, Workspace Group

GMS
Primary Health Properties, Sula Iron & Gold

FINALS
Applied Graphene Materials

IMSS
Barratt Developments, esure Group, G4S, ICAP, Kier, TalkTalk, Tullow Oil, Ultra Electronics

AGMS
Avingtrans, Barratt Developments, Hays, Strategic Equity Capital, Unitech Corporate Parks

FINAL DIVIDEND PAYMENT DATE
Pacific Horizon Inv Trust

INTERIM DIVIDEND PAYMENT DATE
Exova Group

INTERIM EX-DIVIDEND DATE
CareTech Holding