BUSINESS LIVE: UK GDP grows 0.6%; IAG profits rise; Rightmove sees improvement in the housing market

ITV is pinning its hopes on an advertising boom during the Euro 2024 football championships as it continues to reel from last year’s Hollywood strikes.

The broadcaster, whose recent hits include Mr Bates vs The Post Office, starring Toby Jones, said revenues fell 7 per cent to £887m in the first three months of the year.

James Sproule, Chief UK Economist, Handelsbanken:

‘The Bank of England yesterday provided a relatively optimistic assessment of the way it expects the British economy to develop and therefore of the interest rate trajectory. Our prediction was that the first rate cut would come in September, but earlier cuts are now widely discussed.

‘While much will be said about Britain’s emergence from recession, the key question (to which there are no easy answers) is: what will get growth here (and across Europe) back above 2% to take?

‘During the 1997 election campaign the song ‘It can only get better’ was played endlessly, perhaps the theme for this election year would be a less exciting ‘It won’t get worse’.’

The FTSE 100 is trading at yet another record high this morning as investors cheered the Bank of England’s dovish tone on Thursday as the UK economy grew better than expected in the first quarter of this year.

Precious metal miners are the biggest gainers among sectors as gold prices rise 1 percent. The index rose 1.8 percent.

According to a report in the Australian Financial Review, Anglo American rose 1.4 percent after Rio Tinto considered a bid for the miner.

IAG rose 0.8 percent after the owner of British Airways reported better-than-expected first-quarter earnings.

Bank of England Governor Andrew Bailey yesterday gave his strongest hint yet that Britain could start cutting interest rates before the US.

Bailey said progress in the fight against inflation could mean cutting rates further than markets currently expect.

Rightmove Plc expects higher mortgage rates and longer property sales times to weigh on buyer sentiment, but still predicts a better 2024 for the UK housing market.

The brokerage kept annual revenue and profit expectations unchanged, but increased its forecast for the number of customers.

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

James Smith, developed markets economist at ING:

“Volatility aside, there are real reasons to think the economy should continue to grow more strongly. Real wage growth is positive and is likely to strengthen as the year progresses. Headline inflation is likely to be below the 2% target from May onwards, with nominal wage growth expected to reach 6% and decline more slowly.

‘And as we outline in our latest ING Monthly Magazine, We think that about two-thirds of the mortgage crisis is now behind us and will weigh less heavily on growth in the coming quarters.

‘Recent higher volumes of economic migration also appear to be boosting activity. 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 better 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 most important unknown is the labor market. We both know from the job vacancies numbers that the market is cooling, but data reliability issues make it difficult to say how much this will translate into higher unemployment.‘

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

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

“Our transformation initiatives and increased demand, including during the Easter holidays, have once again delivered very good results with an improvement in both sales and operating profit,” IAG CEO Luis Gallego said in a statement.

European rivals Lufthansa and Air France-KLM reported a worse-than-expected first quarter as they battled 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 their books balance by the end of the financial year, and IAG is no exception as it looks to capitalize on strong demand .

Ben Laidler, Global Market Strategist at eToro:

‘Britain’s recession is over and the green shoots of economic recovery are the strongest in more than two years. Encouragingly, the recovery has spanned all sectors, from manufacturing to services.

“GDP grew 0.6% bigger than expected in the three months to March, recovering from the 0.3% contraction at the end of last year. The recovery was led by picking up business investment and production.

‘The stronger economy comes along with the prospects for interest rate cuts in the summer and the recently weaker pound. This sparked a long-awaited relief rally in the overlooked FTSE 100, as well as some political relief in Downing Street.”

Thomas Pugh, economist at RSM UK:

“Such a strong recovery in GDP could reduce pressure on the MPC to cut interest rates as soon as possible. With the economy showing strong growth in the first quarter, the cost of waiting for a rate cut is now likely to be seen as lower.

‘However, inflation and labor market data will be much more important for the MPC’s decision. We still think the first reduction will happen in June, but between then and August it will be exciting.

‘Overall, today’s data reinforces our view that the fourth quarter of last year will mark the trough of a particularly painful period of stagnation for the UK economy. But Q1 represents a turning point. The rate cuts are likely to take place 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 UK economy emerged from recession in the first quarter of 2024, growing by a better-than-expected 0.6 percent, new data from the Office for National Statistics shows.

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