At this moment, continental Europe, China, Japan and major Southeast Asian economies are combating multiple concerns. Among emerging markets, India is showing some promise of growth. But for the U.S., the situation remains worrisome for other developed economies. However, the UK has bucked the trend, emerging as a beacon of hope.
GDP Revised Upward
According to official data, GDP rose by 0.4% for the Jan-Mar period. This is higher than the previous estimate of 0.3%. Additionally, year-over-year growth for the first quarter was also revised upward to 2.9% from the earlier estimate of 2.5%. GDP growth for 2014 was revised up to 3% from 2.8%.
The major driver of growth during the first quarter of 2015 was the substantial increase in disposable income. Real disposable income increased 4.5% on a year-over-year basis. This is the sharpest pace of growth since 2001. The increase in consumer spending also helped to neutralize the negative impact of a slump in trade.
Consumer Confidence Peaks
Another report released earlier this week showed that consumer confidence has increased to its highest point in 15 years. Market research company GfK’s consumer confidence index increased by six points in June. This takes its total score to seven, a level which not been regularly posted since the end of the 90’s.
The report also indicated that items requiring significantly high levels of expenditure were witnessing great demand. This includes the likes of televisions and furniture. Such a pattern was a result of a low level of inflation and a steady increase in wage growth.
Wage Growth, Low Inflation
Data released this month revealed that wage growth increased to 2.7% in April. This was the fastest pace of growth recorded in four years. It was also higher than the expected rate of 2.1%. In March, wages had grown at 2.3%.
Meanwhile, private jobs increased 3.3% in April while the public sector posted a 0.3% increase. Unemployment rate was flat at 5.5% for three-month period ending April, identical to the period til March. As of today, joblessness has declined in the U.K. for nearly six years.
Additionally, core inflation declined to 0.8% in April, its lowest level in 14 years. This metric inched up to 0.9% in May but the effect of inflation has remained limited. The CPI contracted by 0.1% in April and rebounded to post a 0.1% increase in May. However, prices of food and fuel remained lower on a year-over-year basis.
Our Choices
A report by Moody’s released earlier in the month had predicted that the U.K. would post robust growth this year as well as in 2016. This is being borne out by several economic indicators. Below we present three stocks set to gain from these trends, which also have a favorable Zacks Rank.
Finding a great value stock can be a tough task. But thanks to our new style score system, we have been able to identify growth stocks which have terrific potential in the near term.
Our research shows that stocks with Value Style Scores of ‘A’ or ‘B’ when combined with Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the value investing space.
Barclays PLC BCS is a major global banking and financial services company, with over £1.42 trillion ($2.36 trillion) in assets as of Mar 31, 2015. Barclays is headquartered in London.
Barclays holds a Zacks Rank #2 (Buy) and has a Value Style Score of ‘B.’ The company has expected earnings growth of 61.3% for the current year. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 9.65.
Prudential plc PUK provides retail financial products and services and fund management to many millions of customers worldwide. It has operations across the U.K., U.S. and Asia.
Apart from a Zacks Rank #2 (Buy), Prudential has a Value Style Score of ‘B.’ The company has expected earnings growth of 17.6% for the current year and a P/E (F1) of 14.60x.
WPP plc WPPGY together with its subsidiaries, provides advertising and communication services worldwide. The company operates in North America, the UK, Europe, the Asia Pacific, Latin America, Africa and the Middle East.
WPP plc holds a Zacks Rank #2 (Buy) and has a Value Style Score of ‘B.’ The company has expected earnings growth of 14.2% for the current year and a P/E (F1) of 15.97x.
The UK is emerging as one of the best bets among developed economies. This is why these stocks would make prudent additions to your portfolio.
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