The week ahead 22 April 2025 - UK inflation slows for a second month
What to watch out for in the UK economy and property market this week.
The likelihood of a Base Rate cut increased last week after data showed UK inflation declined by more than expected. CPI inflation stood at 2.6% in March, down from 2.8% in February and lower than the consensus forecast of 2.7%. The news comes as the pound strengthened against the US dollar, which will make most commodities cheaper to buy in sterling. Also, the price of oil has declined this year, which is gradually filtering through to petrol prices. These factors should make it easier for the Bank of England’s Monetary Policy Committee (MPC) to prioritise supporting growth. Consequently, we are forecasting a 25 bps Base Rate cut at the next MPC meeting on 8th May.
Thursday last week saw the ECB cut its deposit interest rate by 25 bps to 2.25% due to “downside risks” and “global trade tensions”. Given the importance of the US as an export market, and the disappointing economic figures for the Eurozone lately, a cut was widely anticipated. The news will increase pressure on other major central banks to reduce interest rates to support growth in the face of a deteriorating global economy and reduced investor confidence.
China reported strong GDP growth for Q1 – up 5.4% on an annual comparison, exceeding a consensus forecast of 5.2%. Normally this would be hailed as a sign of strength for the global economy, although many commentators attributed the rise in part to goods being rushed to market to beat the deadline for the introduction of the new US tariffs. Indeed, recent Chinese government data showed cargo transiting the country’s ports peaked in late March and has since declined. Interestingly, there was also an increase in US retail sales in March, partly driven by strong auto sales, which analysts have suggested may reflect a rush to purchase before the new tariffs were levied on imports in April.
Wednesday of this week will be a big day for the global economy with the publication of early ‘flash’ PMI figures for several countries, including the USA.
For all major economies we are forecasting their composite PMI figure to have declined in April, with manufacturing industries hardest hit due to the clouded outlook for trade. Services industries may report less of a fall in activity, as lower interest rates start to support demand for consumer services. Also, fuel costs have been declining which should have eased pressures on household incomes, thus benefiting consumer-facing industries.
This week's figures
WEDNESDAY 23 APRIL
UK ‘Flash’ PMI Composite Index, April
51.5 previous
50.9 forecast
We believe the April figures will show trading conditions for the manufacturing side of the economy remained challenging this month, with growth weighted towards services industries.
US ‘Flash’ PMI Composite Index, April
53.5 previous
51.1 forecast
Given the level of financial markets volatility and unease publicly expressed by American CEOs on the impact of the new tariff regime, we are expecting a marked decline for the US PMI figure for April.
FRIDAY 25 APRIL
UK Consumer Confidence, April
-19 previous
-20 forecast
This month has seen a lot of negative news about the global economy for consumers to digest, although recent data on pay and inflation in the UK has been upbeat. We are forecasting a small decline in consumer confidence in April.
