KEY POINTS:
- UK GDP fell by 0.1% in the three months to October 2025
- The 0.1% fall in the three months to October 2025 was the first three monthly fall in real GDP since December 2023
- GDP in October is estimated to have fallen by 0.1%
- British Pound weakened following the GDP release
GDP REPORT:
The UK Office for National Statistics (ONS) released the monthly GDP report today and the data missed expectations almost across the board.
Real gross domestic product (GDP) fell by 0.1% in the three months to October 2025, following growth of 0.1% in the three months to September 2025 and 0.2% in the three months to August 2025. That’s clearly a slowing trend.
There were falls in two of the three main sectors. This was largely because of a 17.7% fall in the manufacture of motor vehicles, trailers and semi-trailers, which made the largest contribution to the decrease in GDP during this period.
In the month of October, GDP is estimated to have fallen by 0.1%, following a similar contraction in September and no growth in August.
MARKET REACTION:
The British Pound weakened following the GDP release as the data strengthened the case for rate cuts. The probabilities for a rate cut at the upcoming meeting were already around 90%, so the data didn’t materially change expectations.
Nonetheless, it could weigh on the market pricing further down the curve as the market was pricing just another rate cut by the end of 2026. In fact, the total easing went from 57 bps to 60 bps following the GDP report.
Next week, we have the UK employment and inflation data. More weakness should weigh on the pound as traders will start to expect more rate cuts in 2026
