Barclays is bullish on equities as the UK's economy shows signs of acceleration, and stocks look likely to benefit:
Following two years of economic stagnation, the UK looks set to finally recover from rigor mortis. Manufacturing and Services PMIs have improved, and consumer confidence has recovered from recessionary levels. Our economics team has revised up its GDP growth forecasts for this year and next, and now expect growth of 1.1% in 2013 (previously 0.9%) and 2.1% in 2014 (previously 1.8%)
The revision to GDP growth forecasts have been driven by two factors: a) Household consumption: supported by an improved housing market outlook, as well as continuing momentum from a strong Q1 and; b) Investment growth: again partly due to the improving housing market, as well as an improvement in business confidence which typically supports capital expenditure. While investment growth is still likely to decline by -9%, in 2013, our quarterly path for business investment in 2013 is stronger than before.
The stocks we think are best leveraged to a pick-up in prospects for the UK. These include Hays (OW, PT 120p), Crest Nicholson (OW, PT 370p), Kingfisher (OW, PT 430p), Dixons (OW, PT 46p), Sainsbury (OW, PT 410p), Whitbread (OW, PT 3420p), Rightmove (OW, PT 2240p), Intu (OW, PT 409p), Mitchells & Butlers (OW, PT 400p) and Northgate (OW, PT 384p).