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Earlier in February, data came out that showed the UK economy grew by 0.1% in the final quarter of last year. This follows the preceding quarter of 0% growth. It goes to show that the economy isn’t performing that well.
Should we get two quarters of negative GDP growth, we’d be in a technical recession later this year. For investors concerned about this potential, here are two FTSE 100 shares to consider.
Recession-resistant goods
First up is Unilever (LSE:ULVR). The company owns a portfolio of strong global brands, including Dove, Hellmann, and Magnum. The stock’s up 10% over the past year, reflecting the solid financial performance over this period.
In the 2024 results released earlier this month, turnover grew by 1.9% versus the previous year. The Beauty and Wellbeing division saw revenue jump 5.5%, with Ice Cream up 4.5%. The CEO spoke of the year as being one of “significant activity” as they focused on “transforming Unilever into a consistently higher performing business”.
This is great, but it’s when times get tough that I feel Unilever could outperform. It’s recession-resistant due to its focus on essential goods, particularly in the house care division. Things like cleaning products will be bought by consumers even during a recession. This should help to keep revenue high regardless of the economic performance.
As a risk, a recession could be triggered by inflation rising even further. This is a trend we’ve started to see, and if it continues, it could cause Unilever to face cost pressures. This could squeeze the profit margins, negatively impacting earnings.
Constant utility demand
Another option is National Grid (LSE:NG). The share price is down 6% over the past year, with an above-average dividend yield of 5.88%.
In my view, the utility provider ticks the box of being a defensive share due to the essential nature of electricity and gas transmission. It has a diversified client base, serving both businesses and individuals.
Even though some might try to cut usage during a recession, people do need to heat their homes and use electricity as a basic need. So the stable cash flow and reliable income this provides to National Grid can be seen as an advantage over other consumer discretionary stocks.
National Grid’s ramping up investment, with a recent £7bn rights issue being a part of a five-year, £60bn investment plan. This should help to future-proof operations and ensure that the business can stay ahead of the competition.
One concern is the recent £1.4bn sale of the US onshore renewables business to a Canadian investment firm. I know this allows National Grid to focus on priorities closer to home. But at the same time, I feel US operations helped to diversify things away from the UK. Renewable energy’s the future, so selling this asset might not be the smartest move.
I think both stocks are worthy of consideration by investors who are concerned that the UK economic outlook could be rather gloomy.