UK GDP stalls as expected

The British economy stalled on a monthly basis in July 2025, in line with expectations, following a solid 0.4% expansion in June. The flat reading underscores the fragility of the recovery, with services, construction, and production sectors showing divergent performance.

Services, which make up the bulk of the economy, managed a modest 0.1% increase. Growth was led by transportation and storage (+1.4%) and human health and social work (+0.4%), reflecting steady demand in essential and logistics-related sectors.

However, this was offset by a 0.7% contraction in information and communication, highlighting continued weakness in tech-related activities amid softer investment and cost-cutting pressures.

Construction activity rose 0.2%, driven mainly by private housing repair and maintenance (+2.4%) and new housing projects (+1.2%). These gains suggest some resilience in housing demand, despite higher borrowing costs and affordability challenges. Still, momentum in broader infrastructure and commercial projects remained limited.

By contrast, production output contracted by 0.9%, weighed heavily by a 1.3% drop in manufacturing. Electronics (-7.0%) and pharmaceuticals (-4.5%) were the largest drags, signaling both cyclical and structural headwinds in high-value-added industries.

Electrical equipment production rose 3.3%, partly cushioning the decline. Mining, quarrying, and utilities also fell, though water supply provided a minor positive offset.

Looking at the three months to July, GDP rose 0.2%, as services (+0.4%) and construction (+0.6%) outweighed a sharper 1.3% drop in production. On an annual basis, GDP grew 1.4%, matching June’s pace but falling just short of forecasts for a 1.5% expansion, reinforcing the impression of a sluggish but positive growth trajectory.

Overall, the data suggest that while the economy continues to avoid contraction, momentum remains weak. The service sector is keeping growth afloat, but weakness in manufacturing and a hesitant recovery in construction highlight the unevenness of the expansion.

Policymakers at the Bank of England will likely interpret the figures as consistent with a gradual cooling of the economy, which could support the case for further monetary easing if inflation continues to moderate.