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U.K. Economy Grows at Fastest Pace in Nearly a Year: 5 Picks

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A summer heatwave and England’s progression to the football World Cup semi-finals has helped the country’s economy post its strongest expansion in nearly a year. These twin factors gave consumer spending a boost during the quarter ended July. Ultimately, services and retail sales were the growth drivers during the quarter.

The impressive growth in GDP will provide the much-needed reassurance to the Bank of England. The country’s central bank raised rates in August, arguing that any economic weakness at the start of the year was only temporary. Now, it is clear that a pickup in consumer spending will likely support a higher degree of economic expansion. This is why it makes sense to pick British stocks at this point.

Expansion Fastest Since August 2017

According to the Office for National Statistics, England’s GDP for the three months ending July came in 0.6% higher than the preceding quarter. The pace of expansion picked up from the 0.4% growth witnessed in the three months up to June and defied most expectations.

The fastest rate of growth experienced since August 2017 came in near the upper bound of forecasts based on a Reuters poll. When considering July alone, GDP expanded 1.6% year-over-year and was 0.3% higher than the pace experienced in June. Both these figures exceeded Reuters poll forecasts.

Consumer Spending Powers Growth Spurt

For over a year now, Britain’s decision to exit the EU has led to a spike in inflation which has weighed on consumers’ purses. This is also because wages have failed to keep pace with rising prices. However, recent industry surveys indicate that high summer temperatures have encouraged Britons to spend more at pubs and restaurants.

England’s progression to the semi-finals of the football World Cup has also loosened purse strings. As a result, the services sector, which constitutes nearly 80% of the British economy, expanded by 0.6% over this period. Additionally, construction activity increased by 3.3%, the fastest pace witnessed since February 2017.

On the negative side, industrial output declined by 0.5%. Declines in manufacturing, electricity generation and oil and gas extraction, and construction led to this contraction. However, Britain’s trade deficit declined to its lowest level since February.

Our Choices

Fresh GDP data from Britain’s Office for National Statistics bears out the Bank of England’s view that economic weakness at the start of the year was only temporary. The football World Cup and unexpectedly warm weather led to a pickup in consumer spending. It is likely that this trend will continue fueling GDP in the months ahead.

Investing in British stocks looks like a smart option at this point. We have narrowed our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Hikma Pharmaceuticals PLC (HKMPF - Free Report) develops, manufactures and markets pharmaceutical products.

Hikma Pharmaceuticals’ expected earnings growth for the current year is 7.6%. The Zacks Consensus Estimate for the current year has improved by 21.5% over the last 60 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

KNOT Offshore Partners LP (KNOP - Free Report) is engaged in owning, acquiring and operating shuttle tankers, designed to transport crude oil and condensates from offshore oil field installations to onshore terminals and refineries.

KNOT Offshore Partners has a Zacks Rank #2 (Buy). The company’s expected earnings growth for the current year is 15.9%.  The Zacks Consensus Estimate for the current year has improved by 5% over the last seven days.

Premier Oil plc (PMOIY - Free Report) is engaged in oil and gas exploration, development and production.

Premier Oil has a Zacks Rank #2. The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 47.6% over the last 30 days.

Ashtead Group plc (ASHTY - Free Report) is an equipment company, which provides rental solutions primarily in United States and United Kingdom.

Ashtead Group has a Zacks Rank #2. The company has expected earnings growth of 30.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 30 days.

EVRAZ plc (EVRZF - Free Report) is a producer and distributor of steel and related products.

EVRAZ has a Zacks Rank #2. The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 19.3% over the last 30 days.

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