The week ahead 28 July 2025 - Signs of recovery for the UK economy in June

The Week Ahead Illustration 28 July 2025

What to watch out for in the UK economy and property market this week.

Further evidence has emerged that a tentative return to growth for the economy occurred in June. The latest retail sales data reported month-on-month growth of 0.9% in June, following a contraction of -2.8% in May; although this was less than the consensus forecast of 1.3%. In part, the hot weather boosted sales for supermarkets, while online retail benefited from discounts and promotions. However, there was a slight cooling in the GfK consumer confidence index, which slid from -18 in May to -19 in June, as households remained cautious in the face of rising inflation. There was also a small month-on-month increase in car production in June which reached 69,000 units, up from 49,800 in May. However, this marks an encouraging finish to a poor second quarter for the automotive industry, following sharp falls in output in April and May.

Last week’s other big UK economic news story was the composite PMI – a business activity index, whose convention is a reading of over 50 points to growth. This came in at 51.0 for June, which was down on the May figure of 52.0; but nevertheless, above the pivotal 50 mark.

Our view is that the UK economy hit an air pocket in April and May, due to the uncertainty caused by the US tariffs controversy and tax rises in Britain. However, there is now mounting evidence that growth has returned in June and July, but at a modest pace. Consequently, we believe the case for further support for the economy from the Bank of England, through a 25 bps Base Rate cut, is now compelling. There is also some evidence that government investment spending may be poised to boost the economy, as in the above-mentioned PMI survey, some manufacturers said optimism is growing in their industries thanks to new defence orders.

This week’s big economic news story will be the US GDP figures for Q2. Based on the numbers available to date, the tariffs controversy does not appear to have hit the American domestic economy as hard as commentators had originally feared in April. Also, a rush to import foreign goods and components ahead of the tariffs in part caused US GDP growth to turn negative in Q1. So, we would expect there to be a counterbalancing drop in imports in Q2. Consequently, we are forecasting a return to growth for US GDP in Q2.

Investment Focus – UK Big Nine Offices

Momentum continues to build across the UK’s key regional office markets with £314m of investment transactions recorded in Q2 2025, up 43% on the first quarter. This brings H1 volumes to £533m, 7% up on the same period last year. Whilst H1 volumes remain significantly below historic trends, transaction numbers indicate improving sentiment with 46 transactions recorded so far this year, the highest H1 level since 2022. Overseas investors command the largest share of investment activity accounting for 31% of transactions over the last 12 months (Jul 2024 – Jun 2025). For more information, please see our Q2 Big Nine report, which is available on the Avison Young UK website.

This week's figures

Tuesday 29 July

UK Consumer Credit, June

£859m previous
£795m forecast

This figure is typically volatile and difficult to forecast. However, the latest GfK consumer confidence survey reported households are saving more, so we would expect to see a corresponding reluctance to take on more debt.

Wednesday 30 July

US Federal Reserve Interest Rate Decision, July

4.50% previous
4.50% forecast

We believe the Fed remains cautious on the outlook for inflation arising from the new tariffs, some of which have not yet been introduced, and will leave interest rates on hold.

US GDP Growth, q-on-q annualised, Q2

-0.5% previous
2.2% forecast

Surveys point to activity holding up reasonably well, despite the uncertainty on trade and volatility in the financial markets, so we are predicting a return to growth for GDP.

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