The week ahead 14 July 2025 - Pressure for a rate cut grows after weak GDP data
What to watch out for in the UK economy and property market this week.
The UK GDP figures reported a second month of contraction, with output down by -0.1% in May, compared to -0.3% in April. The decline was a surprise as City forecasters were predicting a small rise of 0.1%. The slide for GDP owed much to weak data from the manufacturing, North Sea oil and gas, retail and construction sectors. That the bad news covers such a diverse set of industries shows there is more to the recent UK economic slowdown than just instability caused by Trump’s tariffs. Recent food and petrol price increases are weighing on consumer spending. The North Sea fossil fuels industry is in long-term decline. The car industry has been hard hit by the US tariffs controversy, but the changeover at factories to new vehicle models is also a factor.
However, there were some bright spots in the GDP numbers. The information and communication sector reported a substantial 2.0% rise in GDP, which is encouraging given this sector is critical to the UK’s long-term growth prospects. Also, the trade data showed a recovery for UK exports, which grew by 2.2% in May, following a fall of -8.8% in April – the month the US tariffs were announced. The increase was 2.9% for exports to the EU, and 1.5% for the rest of the world. The slower growth for non-EU exports was partly due to a weak recovery for exports to the US, which plunged in April.
An encouraging news story last week on the UK economy was the latest Deloitte Chief Financial Officer (CFO) survey. The study found CFOs of UK firms were now more interested in investing at home than abroad, with Britain ranking joint number one (alongside India) as the country they believe is the most attractive investment target. At the end of last year, the UK had ranked sixth. The survey also found more CFOs were interested in higher risk investments, suggesting confidence on the outlook is growing.
This week sees the publication of inflation and labour market statistics for the UK.
The employment data has been weakening for several months now, and we are expecting more of the same in the latest numbers. However, there will be an element of “the bad news is the good news”, as more evidence the labour market is slowing, plus the disappointing GDP figures for May, will heap pressure on the Bank of England Monetary Policy Committee to cut the Base Rate at its next policy meeting, which is in August.
Turning to inflation, price pressures are building again, especially for food and energy. However, this month saw the introduction of the new Ofgem price cap, which should cut energy utility bills by around 7% from July onwards. Also, oil prices have retreated from its 19th June peak. So, we are forecasting a rise for inflation in June, followed by a deceleration in July.
Investment Focus – House prices
UK House Price growth slowed from 3.9% in Q1 to 2.9% in Q2, according to Nationwide, indicating that the majority of regions saw a modest slowdown in annual growth. The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April. Nevertheless, we still expect activity to pick up as the summer progresses, despite ongoing uncertainty in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive. Earnings are rising at a healthy pace in real terms, household balance sheets are strong and borrowing costs are likely to moderate a little over the rest of the year.
This week's figures
WEDNESDAY 16 JULY
UK CPI Inflation, y-on-y, June
3.4% previous | 3.7% forecast
Both food and petrol prices have been increasing this summer, so we are forecasting another rise for inflation in June. We are also predicting a fall in July due to the introduction of the new and lower Ofgem energy bills price cap.
THURSDAY 17 JULY
UK Unemployment Rate, May
4.6% previous | 4.7% forecast
This indicator has been rising lately, as many companies saw business costs increase in April. Given the weak GDP figures for May, we are forecasting the unemployment rate to edge up.
