The week ahead 23 February 2026 - Evidence builds of a 2026 rebound for the economy
What to watch out for in the UK economy and property market this week.
Last week saw a disappointing set of labour market statistics overshadowed by other data that suggests the UK economy is seeing a rebound in the opening months of this year.
Figures for December 2025 showed that the UK unemployment rate increased to 5.2%, up from 5.1% in November. Also, wage growth slowed to 4.2% in December, down from 4.6% in November. The UK jobs market has now been slowing for over a year now, with increased employer costs, a higher minimum wage and greater use of AI weighing on demand for workers.
Meanwhile, inflation in January 2026 declined to 3.0%, down from 3.4% in December. This news, along with the increase in the unemployment rate, caused 10-year gilt yields to fall, as the financial markets priced in a greater likelihood of a cut to the Bank of England Base Rate.
In more upbeat news, the preliminary UK PMI index for February read at 53.9, up from 53.7 in January. City forecasters had been predicting 53.3. The PMI is a business activity index whose convention is that a reading of above 50.0 indicates growth for the commercial side of the economy. Encouragingly, the rise was in part driven by firms seeing high volumes of new work.
Also, the January UK retail sales data was much stronger than expected. Sales volume was up by an impressive 1.8% in January on a month-on-month comparison, beating the consensus forecast of 0.2%. This was due to strong sales of artwork and antiques. Also, online jewelers reported “unprecedented” demand, which probably relates to the spike in the gold price in January.
While the labour market is clearly in a slowdown, we feel the PMI and retail sales data point to a strong start for large swathes of the economy in 2026.
This week sees data released that will give us a better idea of the state of the consumer side of the UK economy.
The UK Consumer Confidence Index has been in negative territory for nearly a decade. However, the January 2026 retail sales data showed that households are willing to spend, including on discretionary purchases like antiques. We believe little has changed for the consumer since January, so are expecting the index to remain unchanged.
UK car production figures for January are published on Friday. Car factories saw a surge in activity in October and November, as they shifted a backlog caused by shutdowns over the summer. The December figures recorded a fall, although given the willingness to make expensive purchases shown in the retail sales data for January, we believe car production probably stabilised last month.
This week's figures
Friday 27 February
UK Consumer Confidence, February
-16 previous | -16 forecast
We are currently in a difficult environment for households, with unemployment rising and pay growth slowing. However, given the encouraging rise in retail sales in January, we are forecasting consumer confidence stabilised in February.
Friday 27 February
UK Car Production, January 2026
53k previous | 53k forecast
Car production fell in December 2025 compared to November, although the January retail sales showed a willingness among consumers to make expensive purchases. This we believe could have held demand for cars steady in January.