BUSINESS LIVE: UK GDP grows 0.6%; IAG profits take off; Rightmove predicts an improvement in the residential market

Rightmove Plc expects higher mortgage rates and longer completion times for property sales to hit buyer sentiment, but has still forecast a better 2024 for the UK residential market.

The real estate agency kept its expectations for annual revenue and profits unchanged, but raised its forecasts for the number of clients.

Rightmove, which runs the UK’s largest property portal, said it expected its customers to grow by 2 per cent on last year’s levels, compared with a previous forecast of a “slight decline”.

James Smith, developed markets economist at ING:

‘Volatility aside, there are genuine reasons to think the economy should continue to grow stronger. Real wage growth is positive and is likely to become even more so as the year progresses. Headline inflation is likely to be below the 2% target from May, with nominal wages growing at 6% and falling more slowly.

‘And as we describe in our last monthly ING, We believe that around two-thirds of the mortgage squeeze is now behind us and will weigh less on growth in the coming quarters.

‘Recent higher volumes of economic migration appear to be boosting activity as well. GDP per capita grew a slightly more modest 0.4% in the first quarter and fell 0.7% in 2023 as a whole (even though overall GDP rose fractionally by 0.1%).

The bottom line is that the economy is entering a brighter period. The timing of the March rebound provides a good starting point for the second quarter, where growth could easily reach 0.4% or 0.5%.

‘The main unknown is the labor market. We know from job vacancy figures that the market is cooling, but data reliability issues make it difficult to say to what extent this is translating into higher unemployment.‘

British Airways owner IAG has reported better-than-expected first-quarter profits, with an operating profit of around $73 million, as the group posted strong bookings and projected a busy and profitable summer.

The first quarter is usually a loss-making one for airlines, with fewer bookings at the beginning of the year.

“Our transformation initiatives and increased demand, including over the Easter holidays, have delivered another very good set of results with improvements in both revenue and operating profit,” said IAG chief executive Luis Gallego. , it’s a statement.

European rivals Lufthansa and Air France-KLM reported worse-than-expected first quarters as they struggled with a host of issues, including consumer payouts and strikes.

But many airlines have expressed hope that a record summer travel season and lower jet fuel prices will help balance their books by the end of the financial year, and IAG is no exception as it strives to capitalize on strong demand. .

Ben Laidler, Global Markets Strategist at eToro:

‘The UK recession is over and the green shoots of economic recovery are the strongest in over two years. Encouragingly, the recovery spread to all sectors, from manufacturing to services.

‘GDP grew a stronger-than-expected 0.6% in the three months to March, recovering from the 0.3% contraction at the end of last year. The recovery has been led by the rebound in business investment and manufacturing.

‘The stronger economy comes with prospects of summer interest rate cuts and a newly weaker pound. This has been fueling a long-awaited relief rally in the overlooked FTSE 100, as well as providing some political relief in Downing Street.

Thomas Pugh, economist at RSM UK:

‘Such a strong rebound in GDP may take some pressure off the MPC to start cutting interest rates as soon as possible. In fact, given that the economy posted strong growth in the first quarter, the cost of waiting to cut interest rates will likely be seen as lower now.

‘However, inflation and labor market data will be much more important to the MPC’s decision. We still think that the first cut will occur in June, but it is very difficult between that date and August.

‘Overall, today’s data reinforces our view that the fourth quarter of last year will represent the nadir of a particularly painful period of stagnation for the UK economy. But the first quarter represents a turning point. Interest rate cuts are likely to come in the summer and growth should continue in the first half of this year and recover further after the summer and into 2025.’

The British economy emerged from recession in the first quarter of 2024, expanding a better-than-expected 0.6 per cent, new data from the Office for National Statistics shows.

It compares with forecasts for 0.4 percent growth and represents an improvement over a 0.3 percent contraction in the final three months of 2023.