This morning has brought some disappointing news for the UK economy.
Monthly GDP is estimated to have fallen by 0.1%, following a fall of 0.1% in September 2025 and no growth in August 2025.
The monthly numbers can usually be critiqued for being erratic but as you can see that last three months have been more consistent, just not in a good way. Thus it follows that the ersatz quarterly number was a disappointment too.
Real gross domestic product (GDP) fell by 0.1%, following growth of 0.1% in the three months to September 2025 and 0.2% in the three months to August 2025.
As you can see it has been successively turning lower. This will not be welcomed in Number 11 Downing Street as it reinforces the narrative that fear of another tax raising Budget, which Chancellor Rachel Reeves was happy to feed acted as a brake on the UK economy.
October
Actually October had a bit of a boost in it which makes the monthly decline even more disappointing.
Services and construction both fell in October 2025, by 0.3% and 0.6%, respectively, while production increased by 1.1% in October 2025.
Can you remember what drove this?
Manufacturing output grew by 0.5% in October 2025, with output in 6 of the 13 subsectors growing in October 2025. This follows a 1.7% fall in September 2025 and a 0.6% growth in August 2025.
It was the return to production of Jaguar Land Rover.
The largest positive contribution came from a growth of 3.6% in the manufacture of transport equipment. This was mainly caused by a 9.5% increase in the manufacture of motor vehicles, trailers and semi-trailers, following a fall of 28.6% in September 2025.
Production
If we change our normal order to start with a positive we see it was a generally strong month for this sector.
On the month, production output is estimated to have grown by 1.1% in October 2025, following a fall of 2.0% in September 2025. Output in all production subsectors increased in October 2025. This was caused by growths in manufacturing output (0.5%), mining and quarrying (4.3%), and electricity, gas, steam and air conditioning supply (2.1%). Water supply; sewerage, waste management and remediation activities also grew in October 2025, by 1.5%.
Let us hope for more good news from mining and quarrying as it includes North Sea Oil and Gas although we know that growth there is against government policy. As we look forwards to this month there is hope for a further improvement in electricity output.
On 5 December at 5:30pm, wind generated 23,825MW of electricity to set a new maximum wind generation record. ( NESO)
However, with the mess that the UK water industry is in I have less faith in those numbers. Plus looking ahead there will be a further boost from Jaguar Land Rover in the November figures.
This shows that there was a small recovery in the industry, though the industry is still 21.8% below the levels we saw in August 2025.
Services
The usual leader of our economic pack had a particularly poor October.
Services output is estimated to have fallen by 0.3% in October 2025. This follows a growth of 0.2% in September 2025. In October 2025, 8 of the 14 subsectors showed a fall.
It is a reminder not to rely too much on the PMI business survey which told us this.
Business activity and new order growth accelerate since September
In fact there was quite a mismatch between the PMI and the GDP numbers.
The headline seasonally adjusted S&P Global UK Services PMI Business Activity Index posted 52.3 in October, up from an earlier ‘flash’ reading of 51.1 and indicative of a moderate expansion of service sector output. The index was also comfortably above the five-month low of 50.8 seen in September.
As you can see they headed in opposite directions. If we look for the detail we see this.
The largest negative contribution to services sector output in October 2025 came from wholesale and retail trade; repair of motor vehicles and motorcycles, which fell by 1.4%……Information and communication also contributed negatively to services sector output in October 2025, falling by 1.2%. This fall was mainly caused by computer programming, consultancy and related activities (down 3.6%).
The latter part is hopefully just a monthly variation as computer programming has been a strong category. If we switch to consumer services which fell 0.1% in October there were a couple of intriguing parts. Imputed Rent on the charge anyone?
The largest positive contributions at the industry level came from buying and selling, renting and operating of own or leased real estate, excluding imputed rent (up 1.0%) and other personal service activities (up 3.3%).
I hope that personal service activities is hairdressing.
Construction
This is an especially awkward area for the UK government which opened by saying it would use house building ( 1.5 million in this parliament) to drive economic growth which does not fit well with this.
Monthly construction output is estimated to have fallen by 0.6% in October 2025.,….. The decrease in monthly output in October 2025 came from decreases in both new work and repair and maintenance, which decreased by 0.7% and 0.6%, respectively. At the sector level, the main contributor to the monthly decrease was private new housing, which fell by 2.4%.
These numbers can be erratic but the recent trend has been down and in this instance does agree with the PMI buisness survey which has been weak for a while. On that front it looks as though more bad news is ahead.
“November data revealed a sharp retrenchment across the UK construction sector as weak client confidence and a shortfall of new project starts again weighed on activity. “Total industry activity decreased to the greatest extent for five-and-a-half years, led by steep falls in infrastructure and residential building work. Commercial construction also faced severe headwinds during November as business uncertainty in the run up to the Budget pushed clients to defer investment decisions.”
That will have been particularly grim news for a government which has pledged to boost this area but instead seems to have provided a brake.
The quarterly figures
If we look for a deeper perspective we see that the ersatz quarterly or rolling three monthly figures have gone from 0.2% to -0.1% recently. But there was something awkward in another part of the release. Because in the past we have seen expansions in government spending and fiscal deficits lead to trade problems. So the number below caught my eye.
The total goods and services trade deficit, excluding precious metals, widened by £4.0 billion to £6.7 billion in the three months to October 2025 compared with the three months to July 2025 . Imports rose by £0.9 billion over this period, while exports fell by £3.1 billion.
The deterioration was in the goods sector.
Total imports of goods increased by £1.0 billion (0.7%) in the three months to October 2025, compared with the three months to July 2025 ….Total exports of goods decreased by £3.0 billion (3.1%) in the three months to October 2025.
Comment
There is not a lot to cheer here. We do still have some annual growth but that is weakening.
The 0.1% fall in the three months to October 2025 was the first three monthly fall in real GDP since December 2023.
That trend if continued will weaken this.
GDP is estimated to have grown by 1.1% in the three months to October 2025, compared with the same three months a year ago….GDP is estimated to be 1.1% higher in October 2025, compared with October 2024.
Along the way we see another set of monthly figures which suggest there is a bias in the UK seasonal adjustment favouring the first half of the year.
