Numbers to watch this week: US GDP, UK policy, OIL results

1. US GDP

The US will release the third estimate of its gross domestic product (GDP) for the March-ended quarter on Thursday. The last two estimates had pegged growth at 6.4%, faster than the 4.3% growth in the preceding quarter. With not much change likely, the attention will be on industry-level data instead.

Most sectors had staged a sharp rebound in the December-ended quarter, led by private industries, which grew 37% sequentially. The government sector was yet to reach pre-pandemic levels.

The recovery has been driven by a fast-paced vaccination drive and increasing demand in the aftermath of the pandemic. Stimulus measures have served well, and inflation is rising. On Wednesday, the central bank also finally changed its tone and projected more rate hikes in the medium term than it had forecast earlier.

But employment data has been missing market estimates of late, and will be key to stabilizing the path to recovery.

2. Apollo Hospitals results

Apollo Hospitals, one of India’s largest healthcare chains, will announce its March-quarter financial results on Wednesday.

Recovery in the company’s revenue has been subdued even after last year’s lockdown ended. Price caps imposed by the government on covid-related treatment have hit earnings in the sector. The decline in medical tourism, one of the major sources of profits for large private hospitals, has also impacted the bottomline.

However, investors have been hopeful, with the second covid-19 wave driving tremendous growth for healthcare shares. The Apollo Hospitals stock has risen nearly 34% this year so far, against a 14% rise for the BSE Healthcare index and 10% rise for the Sensex. However, the push for free vaccinations led by the Centre has led to some correction. Investors will watch out for the firm’s guidance on how it foresees its performance in coming months in view of the vaccination drive and a subsiding second wave.

3. UK policy

The Bank of England (BoE) will hold its fourth monetary policy meeting for the year on Thursday. The meeting comes soon after the UK reported a 2.1% retail inflation rate for May—the first time in nearly two years that it has crossed the BoE’s 2% target. This brings into focus its policy rate, which remains at 0.1% after being cut twice last year as part of the stimulus. As in other major economies, the inflation clock is ticking in the UK too, even as policymakers appear keen to continue the stimulus measures. Economists warn that the inflation surge could become persistent due to the sharp recovery. Andy Haldane, the BoE’s outgoing chief economist, also said the UK must not become too dependent on “monetary medicine", and has flagged inflation concerns. For now, BoE may just wait and watch, until at least the employment recovery stabilizes.

4. China policy

Chinese central bankers will go through a similar drill as those in the UK this week. Retail inflation has jumped from (-)0.2% in February to 1.3% in May, while the policy rate remains unchanged for 14 months at 3.85%. People’s Bank of China (PBoC) officials have indicated that no revision in the monetary policy is on the cards yet, and that inflation is under control.

Rising prices are indeed a concern, but PBoC assesses recovery to be still nascent and uncertain. Unlike advanced economies, where the concerns of “overheating" have raised speculation about central bank actions, Chinese bond yields have remained low. PBoC has earlier flagged insufficient investment growth and subdued consumption recovery as reasons for its continued dovish stance. The central bank will announce its decision on Monday.

Retail inflation in May was the highest in eight months, and faces pressure from rising commodity prices.

5. OIL earnings

OIL, a major state-owned hydrocarbon explorer, will announce its March quarter earnings on Monday.

The segment had faced massive losses during the lockdown in 2020. Even by the December quarter, OIL’s revenue was 19% lower year-on-year. However, there was a hint of early recovery, as profit-to-sales ratio rose to 36%. That recovery may only gain further ground this time as the mainly upstream company looks set to benefit from rising global commodity prices.

The rebound in international crude oil and natural gas prices could prop up earnings and margins in the coming months as well. The positive outlook has enthused investors: OIL shares have risen 38% this year, outperforming peers—the BSE Oil and Gas index has gained 20%. Analysts expect a low base to boost sales growth in the coming quarters, as the company nears pre-covid levels.