BUSINESS LIVE: UK GDP grows 0.6%; IAG earnings take off; Rightmove

Rightmove Plc expects higher mortgage rates and lengthier completion times for property sales to weigh on buyer sentiment, but has still forecasted a better 2024 for the UK residential market.

The estate agency kept its annual revenue and profit expectations unchanged but raised its customer numbers forecast.

Rightmove, which runs UK’s largest property portal, said it expected its customers to grow by 2 per cent from last year’s levels, compared with earlier forecast of a ‘slight decrease’.

James Smith, developed markets economist at ING:

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

‘And as we outline in our latest ING Monthly, we think around two-thirds of the mortgage squeeze is behind us now and will weigh less strongly on growth in the quarters ahead.

‘The recent higher volumes of economic migration appear to be boosting activity too. GDP per capita grew by a slightly more modest 0.4% in the first quarter, and fell by 0.7% in 2023 as a whole (despite overall GDP rising fractionally by 0.1%).

The bottom line is that the economy is entering a brighter period. The timing of the March bounce provides a nice starting point for the second quarter, where growth could easily come in at 0.4% or 0.5%.

‘The main unknown is the jobs market. We know both from the job vacancies numbers that the market is cooling, but data reliability issues make it hard to say how far this is translating into higher unemployment.‘

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

The first quarter is often loss-making for airlines, with fewer bookings at the start of the year.

‘Our transformation initiatives and increased demand, including over the Easter holidays, have delivered another very good set of results with improvement to both revenue and operating profit,’ IAG Chief Executive Luis Gallego said in a statement.

European rivals Lufthansa and Air France-KLM reported worse than expected first quarters as they struggled with a range 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 capitalise on strong demand.

Ben Laidler, global markets strategist at eToro:

‘The UK recession has ended, with the green shoots of economic recovery the strongest they have been in over two years. Encouragingly, recovery spanned across sectors from manufacturing to services.

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

‘The stronger economy comes alongside the outlook for summer interest rate cuts and the recently weaker pound. This has been driving 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 a bit of pressure off the MPC to start cutting interest rates as soon as possible. Indeed, with the economy posting strong growth in Q1, the cost of waiting to cut interest rates will probably be seen as lower now.

‘However, the inflation and labour market data will be much more important to the MPCs decision. We still think the first cut will come in June, but it’s a close call between then and August.

‘Overall, today’s data reinforce our view that Q4 last year will represent the nadir of a particularly painful period of stagnation for the UK economy. But Q1 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 pick up further after the summer and into 2025.’

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

It compares to forecasts of 0.4 per cent growth and represents an improvement from a 0.3 per cent contraction in the final three months of 2023.