The week ahead 16 February 2026 - Cool UK GDP numbers increase the likelihood of a Base Rate cut
What to watch out for in the UK economy and property market this week.
The UK GDP figures for the final quarter of 2025 made for underwhelming reading, with quarter-on-quarter growth of just 0.1%. While better than no growth, this was below the 0.2% City forecasters were predicting, and confirmed economic conditions are sluggish. The Autumn Budget acted as a brake on activity for much of Q3 and Q4 of 2025, as the uncertainty sent many firms and households into ‘wait-and-see’ mode. This raises the concern that any future Labour Party leadership election might similarly cause a slowdown in the economy.
However, the saying is ‘the bad news is the good news’ for the economy, as weak GDP figures have added to the pressure on the Bank of England Monetary Policy Committee (MPC) to cut the Base Rate at its next meeting, which is on 19th March. The February meeting saw a narrow majority (five to four) voting to leave rates unchanged. We believe there is a good chance March will see the first of the two 25 bps Base Rate cuts we are forecasting for 2026.
In the USA, January 2026 saw 130,000 new workers join payrolls, up from 48,000 in December 2025 and the strongest month for job creation since President Trump took office. The increase was largely driven by the public sector, particularly an 82,000 increase in healthcare workers, and a rise of 42,000 for social care. In contrast, the payrolls of financial firms shrank by -22,000, while the professions saw little change. This could fuel growing concerns that increased use of artificial intelligence will hit employment growth in some white-collar industries.
There was positive news on the jobs market in the Eurozone, with quarter-on-quarter employment growth of 0.2% reported for Q4 2025, which was ahead of the consensus forecast of 0.1%.
This week sees a lot of UK data released, covering the labour market, inflation and the PMI business activity index.
The employment and unemployment figures for the UK made for disappointing reading in 2025. Payrolls declined last year, while the unemployment rate increased, reflecting slow growth in the economy, plus higher taxes on employers. However, a number of business surveys suggest that confidence among firms has enjoyed a post-Budget bounce back. So, we believe the payroll figures should now strengthen, causing the unemployment rate to level out.
Turning to the inflation data, the Bank of England’s current forecast is the early months of 2026 will see a deceleration for price growth. Indeed, Threadneedle Street is now predicting inflation will be near to the 2.0% target by April, down from 3.4% in December. We are forecasting a decline in the January CPI inflation figure.
This week's figures
Tuesday 17 February
UK Unemployment Rate, December 2025
5.1% previous
5.1% forecast
With the autumn Budget firmly behind us, and surveys pointing to improving business confidence, we believe more firms pushed ahead with recruitment plans, causing the unemployment rate to stabilise.
Wednesday 18 February
UK CPI Inflation, y-on-y, January 2026
3.4% previous
3.1% forecast
We view December’s uptick in inflation as a blip, and low footfall figures in recent months could make retailers nervous about price hikes, resulting in a slowing of inflation in January.
Friday 20 February
UK Composite PMI Index, February 2026
53.7 previous
52.0 forecast
January’s PMI reading at 53.7 was surprisingly punchy, driven by post-Budget optimism. We are expecting a retreat from that strong reading, but to a level that is still healthily above the pivotal 50 mark.
