The week ahead 04 August 2025 - US GDP rebounds, but the jobs market stalled
What to watch out for in the UK economy and property market this week.
Last week saw some mixed data published on the US economy, which will create dilemmas for the US government and the Federal Reserve.
Quarter-on-quarter US GDP growth hit 3.0% on an annualised basis in Q2, which was ahead of the consensus forecast of 2.4% and marked a rebound on the contraction seen in Q1 of -0.5%. However, the figures come with a hefty caveat. Imports are a downwards pressure on GDP, and in Q1 many US firms rush ordered foreign goods to get in ahead of the new tariffs in April. This meant imports surged in Q1 then tumbled in Q2, so the GDP figures have been heavily distorted. Looking beyond trade, the data was a mixed bag, with faster growth for consumer spending but a slowdown for investment.
Other data released last week pointed to a slowdown in the US jobs market. The number of job openings declined from 7.7 million in May to 7.4 million in June. Meanwhile, the closely watched non-farm payrolls numbers, which show whether there is net growth in jobs, contained some big surprises. The figures for May and June were heavily revised downwards, with May dropping from 144,000 new jobs to just 19,000; while June slid from 147,000 to 14,000. The July payrolls reading was 73,000, well below the consensus forecast of 110,000. Also, the unemployment rate nudged up from 4.1% in June to 4.2% in July.
Some commentators have lately been saying the new tariffs are not hitting the US economy as much as was originally feared, but the latest data has called that viewpoint into question. Last week saw the US Federal Reserve leave its policy interest rate unchanged, but two rate setters did vote for a cut. The latest US jobs data may have opened a path to a rate cut at the next meeting.
On Thursday, the Bank of England Monetary Policy Committee (MPC) will make its decision on the Base Rate, with a 25 bps cut widely anticipated. While inflation is well above target at 3.6%, the Bank’s own forecast is for it to fall in the autumn. So, the MPC will be more focused on the growing evidence that both the labour market and the economy are slowing. As well as a cut this Thursday, we are forecasting another 25 bps reduction before the end of the year.
This week's figures
Tuesday 5 August
Euro Area PPI Inflation, y-on-y, June
0.3% previous
0.0% forecast
PPI inflation is often referred to as ‘factory gate inflation’ so indicates price rises manufacturers face when buying raw materials and components. Given the signs the global economy is slowing, we believe PPI inflation has probably come to a standstill.
Thursday 7 August
Bank of England Base Rate Decision, August
4.25% previous
4.00% forecast
A cut in the Base Rate is widely expected at this meeting, given recent data pointed to slowdowns for both the jobs market and GDP growth.
