The week ahead 27 April 2026 - Business activity figures beat expectations
What to watch out for in the UK economy and property market this week.
Given the gloomy commentary circulating on the impact of the Middle East war, it was a welcome surprise last week to see a number of economic indicators come in ahead of expectations.
The UK PMI business activity index for April read at 52.0, up from 50.3 in March and ahead of the consensus forecast of 49.8. The PMI is a survey of businesses whose responses are compiled into a score which if it is over 50.0 points to expansion in the commercial side of the economy. So, it is surprising to see activity holding up despite the war in the Middle East and higher fuel costs. Some manufacturers said clients had brought forward orders in anticipation of higher prices in the coming months.
Unsurprisingly, the UK CPI headline inflation figure increased from 3.0% in February to 3.3% in March, driven by higher petrol prices. However, core inflation (which excludes fuel and food) fell slightly, from 3.2% in February to 3.1% in March. Analysts had expected no change. This is significant, as the Bank of England rate setters may use this as a justification for not increasing the Base Rate at their meeting this week; as traditionally the central bank only takes inflation caused by higher fuel prices into account if the increase becomes protracted.
Also, the UK unemployment rate fell unexpectedly, from 5.2% in January to 4.9% in February.
Nevertheless, gilt yields saw volatility last week as the Prime Minister’s position became increasingly precarious. The 10-year gilt yield stood at 5.01% on Friday, up from 4.69% a week earlier. However, demand for gilts is holding up. For instance, a UK government bond auction last week saw cover ( the ratio of money bidding compared to the face-value of the gilts on sale) of 3.3.
This week will see the Bank of England, Bank of Canada, ECB and the US Federal Reserve central banks hold their policy meetings. Given that all four are faced with slowing labour markets and rising inflation, we expect them to each leave their interest rates unchanged. The markets will be carefully monitoring what is said at the press conferences for clues on what the future direction may be for rates.
Also, the USA and the Euro Area will report GDP figures for Q1 this week. We believe the disruption to global trade from the war probably caused the Euro Area economy to slow in March, dampening Q1 GDP growth. However, the US faced mixed economic conditions in Q1. While America’s large oil and gas sector will have gained from energy price rises, there have been partial shutdowns for some agencies of the Federal government, which will negatively impact growth. Last week saw significant job losses announced by major tech firms in the US, a reminder that the labour market is slowing.
This week’s figures
THURSDAY 30 APRIL
Bank of England Base Rate Decision, April
3.75% PREVIOUS
3.75% FORECAST
With headline inflation up, but core inflation down slightly in the latest figures, we believe the Bank rate setters will not feel any pressure to hike the Base Rate at this meeting.
Euro Area GDP Growth, q-on-q, Q1
0.2% PREVIOUS
0.0% FORECAST
Several Euro Area nations have export-oriented economies and the bloc imports most of its oil and gas, so its exposure to the Middle East War is high. We are forecasting a March dip in output has caused GDP to flatline in Q1.
US GDP Growth, q-on-q (annualised), Q1
0.5% PREVIOUS
0.7% FORECAST
US GDP growth for Q1 2026 is a difficult call, as the oil and gas sector probably had a strong quarter, but the partial shutdowns for some government agencies will have slowed activity. We believe growth will be up slightly compared to Q4 2025.
