Global Data Pod: The starting point is good and that matters

The Western European economy shows unexpected resilience despite ongoing geopolitical tensions and energy price shocks. Recent PMI data for both the UK and the euro area indicate growth near potential, suggesting consumers are successfully smoothing through inflationary pressures. While recession risks have receded, the focus has shifted toward persistent inflation and the potential for second-round effects on wages. The Bank of England remains cautious but faces increasing pressure to tighten policy, with expectations for an incremental shift toward rate hikes later this year. Meanwhile, the European Central Bank appears poised for a September rate increase, contingent on energy price stability and growth trends. UK fiscal policy remains a point of uncertainty under the new government, with potential spending pressures from defense and infrastructure likely to be balanced by tax adjustments rather than significant borrowing.