The week ahead 27 October 2025 - Business activity recovered in October
What to watch out for in the UK economy and property market this week.
While the general tone of UK economic news lately has been downbeat, last week did see some encouraging data released. The first draft of the Composite PMI, a business activity index, read at 51.1 for October, marking a recovery on the 50.1 figure for September. The convention of the index is that a reading above 50.0 points to growth for the commercial side of the economy. Firms reported a rebound in new orders, and lower input cost inflation.
Turning to the consumer side of the economy, UK retail sales volumes increased by 0.5% in September, thanks to strong sales for computer and telecommunications retailers. The consensus forecast was for sales to decline by -0.2%. There was a small fall in sales volume for food stores, which may suggest that recent high food price inflation is starting to deter customers. Separately, there was a rise in the GfK consumer confidence index, which was up from -19 in September to -17 in October. Analysts had been predicting a decline to -20.
There was also good news on prices, with CPI inflation in September remaining unchanged at 3.8%, defying forecasts of a rise to 4.0%. Core inflation (which excludes volatile items like food and fuel) unexpectedly edged down, from 3.6% in August to 3.5% in September. This has reawakened speculation that the Bank of England may cut the Base Rate before the end of the year – possibly by 25 bps in December.
While the above good news on the economy is encouraging, it should be remembered the UK faces the near certainty of tax rises and spending cuts in the government’s November budget. We still believe the economy will slow in the run-up to the budget, followed by a second deceleration in April 2026 when many of the budget measures will probably be applied.
Central banks will dominate the business news this week, with interest rate decisions expected from the Bank of Canada, the ECB and the US Federal Reserve.
The Bank of Canada and the Fed are expected to respond to signs their respective economies are slowing, and cut interest rates. In contrast, the ECB is now convinced it has interest rates where they need to be for the time being, so we see no change coming this week in the Eurozone.
We suspect most central banks in advanced economies will in the coming months be more focussed on supporting growth than fighting inflation. This should ease pressure on bond yields, which will be good news for property yields.
This week's figures
Wednesday 29 October
US Federal Reserve Interest Rate Decision, October
4.00%-4.25% previous
3.75%-4.00% forecast
With the labour market slowing, and signs inflation is levelling off, it is widely anticipated that the US Federal Reserve will cut its policy rate by 25 bps at this meeting.
Wednesday 29 October
Bank of Canada Interest Rate Decision, October
2.50% previous
2.25% forecast
The Canadian economy contracted in Q2 by -0.4%, and data for July and August painted a mixed picture. Yet, core inflation rose in September. We believe policymakers will prioritise supporting growth and cut interest rates.
Thursday 30 October
ECB Interest Rate Decision, October
2.15% previous
2.15% forecast
With GDP growth sluggish, but inflation ticking upwards in recent months, we are forecasting the ECB will leave its policy rate unchanged and continue to monitor the data.
