The week ahead 14 April 2025 - The US braces for the tariff impact
What to watch out for in the UK economy and property market this week.
Global financial markets remained volatile last week, albeit with a mid-week rebound after a 90-day moratorium was announced for some of the new US tariffs. Despite the climb down, nervousness remained as duties on Chinese goods rose to 125%, a step that will inevitably stoke US inflation. An article in the Financial Times reported some Chinese firms are quoting price increases of 70% to sell to America. On the plus side, there is now a feeling in the business world that financial markets are acting as a moderating influence on White House policy.
Overshadowed by last week’s tariffs drama was the release of the UK GDP figures. A 0.5% month-on-month increase was reported for February, markedly exceeding a consensus forecast of 0.1%. There was also a small upwards revision for the January figure, from -0.1% previously to zero. The numbers were buoyed by strong output from the information and communication, retail and manufacturing sectors. The GDP numbers tally with survey evidence suggesting the UK economy has seen some ‘green shoots’ lately.
Returning to the US tariffs controversy; while it is beyond question this will dampen global growth in the short-term, we believe that further down the line this situation could create opportunities for the British economy. In the future, there might be growing interest in the UK from global corporations looking for an alternative to the American market. This might lead to inwards investment and future demand for business premises. Also, the volatility for bond yields last week will increase the pressure on the Bank of England to cut the Base Rate. We are predicting a 25 bps reduction at the next Monetary Policy Committee meeting, which is in May.
This week’s big news is the ECB’s policy rate announcement, which comes on Thursday. This will be the first interest rate setting meeting by a major global central bank since the US tariffs were announced on 2nd April. The Eurozone economy has been struggling to grow for some time, so the threat to exports from US tariffs strengthens the argument for cutting interest rates. Higher bond yields for Eurozone nations, and the recent strengthening of the euro against the US dollar are additional reasons for the central bank to loosen policy.
This week's figures
TUESDAY 15 APRIL
UK Pay Growth (ex bonuses), y-on-y, February
5.9% previous
5.8% forecast
The UK economy has seen sluggish GDP growth for several months now, and consequently we believe pay growth probably decelerated in February.
WEDNESDAY 16 APRIL
UK CPI Inflation, y-on-y, March
2.8% previous
2.9% forecast
UK inflation is widely expected to track higher in the coming months, although a decline for petrol prices in March will in our opinion moderate the increase seen in the March figures.
THURSDAY 17 APRIL
ECB Policy Rate decision, April
2.50% previous
2.25% forecast
Give the sluggish state of the Eurozone economy, a reduction at this meeting was already anticipated. However, the global financial markets volatility make a cut highly likely.
