Business sentiment surveys point to a healthy economy, despite the energy shock
In March, business sentiment (ISM PMI) remained in expansion territory in both the manufacturing (which hit a four-year high) and non-manufacturing sectors, but supplier delivery times extended and, above all, input-price growth accelerated (and stood at a high not seen since 2022). By contrast, consumer sentiment (Michigan) has dipped sharply. Expectations deteriorated, particularly around 1-year inflation.
Mortgage rates have been rising since the start of the war in the Middle East
This, combined with the continuing rise of prices for existing homes, is expected to slow the growth of outstanding mortgages in 2026. However, growth in outstanding consumer loans remained robust at the start of the year. In Q4 2025, growth in outstanding business loans and debt issuance increased compared with the previous quarter, whilst the trend of falling short-term interest rates was interrupted by the war.
