The UK economy is on a roll. The latest government numbers put April monthly growth at 2.3%. This is the fastest increase seen since July last year, when it grew by a huge 7.3%.
Retailers drive growth
The latest increase is explained by the reopening of non-essential retailers during the month. It follows that the segment’s growth far outstrips that of other sectors. Retail volumes increased by 9.2%. Among retailers, clothing retailers saw an over 25% increase. This is evident in the rising share prices of FTSE 100 clothing retailers as well.
2 FTSE 100 retailers to buy
Consider the luxury brand and retailer, Burberry‘s, that I both like and own. It has recovered quite a bit, although not back to pre-pandemic levels, but now I reckon it is only a matter of time before it does.
The iconic British brand had started recovering early last year, possibly because of its popularity in China. While China was the first economy to slump because of coronavirus, it was back up fast as well. Since last year, the stock is up over 40%. It has gained 7% since the reopening in the UK in April. With its recent encouraging updates, I think Burberry would have been a good stock to buy now, if I did not hold it already. I would watch out for news of a fresh breakout of coronavirus in China, though.
JD Sports Fashion is another retailer I like and own shares of. Its share price is at all-time highs presently, but its performance is strong too. Its has remained profitable even in the past year, and it expects to continue to remain so next year too. With greater support from the economy now, I can see why investors are bullish on the stock.
Realistically, I would expect a slower rise in JD’s share price from here, because it has made sharp gains already. This can be a bit of a downer. But over the long term I expect the stock to maintain momentum.
Construction maintains strength
It was not just retailers that caught my attention in today’s economy report, however. The construction sector, too, has shown an interesting trend. While the sector has actually shrunk in April from the month before, it is still at levels higher than those seen before the pandemic, in February 2020. This means that construction had already recovered to pre-Covid-19 levels before April.
I think this is encouraging and immediately takes my mind to FTSE 100 construction companies like CRH and Ashtead. The catch here, however, is that both of them have a strong US market focus. So I am focusing on real estate companies that are more UK-centric instead.
While I like all the FTSE 100 property companies, I continue to like Persimmon in particular because of its huge dividend yield of 7.7%. It has made significant share price gains since the crash and is also optimistic about its future. This is despite the fact that supportive government policies will soon start getting withdrawn. Nevertheless, the pickup in economy should make up for at least some of this.