MTS Insights

UK GDP contracted -0.1% MoM in April after gains of 0.4% in February and 0.3% in March, with the weakness driven primarily by a -0.2% decline in services output. Production was unchanged on the month while construction rose 0.1%.

• The softer April reading does little to change the broader picture, however. Real GDP grew 0.7% in the three months through April, accelerating from 0.6% growth in the three months through March and 0.5% through February.
• Services remained the key driver of growth, expanding 0.8% over the latest three-month period. Construction output rose 1.6%, marking a significant improvement and extending a recovery after a prolonged downturn through much of late 2025 and early 2026.
• Production output was the weak spot, contracting -0.1% over the three months through April following a modest gain in the prior period.
• Overall, the report suggests the UK economy entered Q2 with positive underlying momentum despite a modest monthly pullback in April, as strength in services and construction continues to offset ongoing softness in the industrial sector.

This month, consumer sentiment ticked up about four index points, or 9%, with consumers experiencing some relief due to the early-month easing in gasoline prices. This measured improvement in sentiment was widespread, seen across age, education, and political party. Lower-income consumers exhibited a particularly strong sentiment increase, consistent with the fact that gasoline comprises a larger share of their budgets. Overall, assessments and expectations of personal finances and business conditions all rose this month. Even with June’s early gains, however, views of the economy are still relatively dour. Sentiment is currently 13% below January 2026 and 19% below a year ago, as consumers remain focused on kitchen table issues. They feel burdened by the recent escalation in inflation and worry that higher inflation could remain stubborn going forward, particularly in the short run. Interviews for this release were completed between May 19 and June 8.

Year-ahead inflation expectations inched down from 4.8% in May to a still-elevated 4.6% this month. The current reading substantially exceeds the 3.4% reading seen in February 2026 prior to the start of the Iran conflict, along with all 2024 readings. Long-run inflation expectations fell back from 3.9% last month to 3.4% in June, remaining notably higher than the 2.8% to 3.2% range seen in 2024.

The New York Fed Staff Nowcast for 2026 Q2 is 2.7%, with the 50% probability interval at [1.6, 3.9]% and the 80% interval at [0.5, 4.9]%. The Staff Nowcast for 2026 Q3 is 2.5%.

• News from this week's data releases increased the estimate for 2026 Q2 by less than 0.1 percentage point and left the estimate for 2026 Q3 unchanged.
• A positive contribution from exports data drove the increase for 2026 Q2.