This UK economy is recovering fast. With a partial easing of lockdown, it grew by 2.1% in March from the month before, we learned this morning. This is the fastest monthly growth it has shown since August, 2020.
Unsurprisingly, the FTSE 100 index has shrugged off the weakness seen yesterday.
UK economy can get even stronger
There could be even better times ahead for the index. I think that these latest numbers indicate a further pick-up in the UK’s growth as we head back to more normality.
This is evident from the details of the release made by the Office of National Statistics (ONS) earlier today. These are as follows:
- It said the schools reopening in March helped growth. This is also seen in the fact that education is the biggest contributor to services growth, which was at 1.9% in March. This shows the immediate positive impact of reopening on the economy.
- Retails sales proved to be another growth driver. In an earlier update, the ONS had pointed out that the impending relaxation of restrictions on hospitality venues was a reason for retail sales’ growth. Some of this easing kicked-in during April, and more is due next week. I reckon there could be a bigger spurt in retail sales, extending this logic.
- Construction saw robust 5.8% growth. As a sector that gains from an economic upturn, I think this could be a good leading indicator for more gains in the coming months.
Would I buy FTSE 100 retail stocks?
Just going by these details, it looks like FTSE 100 retail stocks could be an example of good buys. Based on such projections, I bought shares in retailers like JD Sports Fashion and Burberry last year. Both stocks have performed well.
However, I believe that much of their share price growth is already priced in. They can continue to rise, but I think it would pay me as an investor to look at smaller reopening stocks too, that have received less investor attention so far. An example of this is fishing equipment provider Angling Direct, which I wrote about yesterday.
But what about inflation?
Related to growth is inflation. I think keeping an eye on inflation is important as the economy rallies. If inflation does start rising fast, cost pressures will mount and policy measures will kick in. Both have the impact of slowing growth down.
A counter to inflation for me is buying commodity stocks. That includes both oil and industrial metal miners. Oil biggies like BP and Royal Dutch Shell are still at somewhat subdued price levels, so I like them as picks for my portfolio.
But FTSE 100 miners have run up quite a bit since last year. As in the case of retailers, I think smaller mining stocks look promising. One example is Ferrexpo, which can show a bigger price increase in the coming months.
My takeaway for FTSE 100 stocks
In sum, I think gains can be made from my FTSE 100 purchases, going by the recovering economy. But the extent of gains can be improved by looking beyond FTSE 100 stocks.