Tentative housing recovery a positive sign for wider economy

We still think CPI inflation will rise from 2.8% in May to a peak of around 3.5% in early 2027 and that the resulting drag on real activity has yet to come. But tentative signs of a turnaround in the housing market may indicate that activity in the wider economy could start to recover before the end of this year. In fact, assuming energy prices don’t rise much further, inflation could rise by less than we are forecasting and GDP may not be as weak as we expect over the rest of this year.