UK Gross Domestic Product MoM for December 2025: A Strong Rebound Amid Lingering Uncertainties
The UK’s Gross Domestic Product (GDP) for December 2025 posted a robust 0.30% month-over-month (MoM) increase, surpassing the 0.10% consensus estimate and reversing two consecutive months of contraction recorded in October and November 2025 (-0.10% each). This latest figure, released on January 15, 2026, signals a tentative recovery in economic activity as the country navigates persistent inflationary pressures and geopolitical uncertainties.
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The UK economy’s 0.30% GDP growth in December 2025 marks a meaningful turnaround from the -0.10% contractions in November and October, according to the Sigmanomics database. This rebound contrasts with the flat growth observed in September 2025 and the subdued 12-month average growth rate of approximately 0.05% MoM over the past year. The acceleration reflects a combination of easing supply chain bottlenecks and a modest pickup in consumer spending during the holiday season.
Drivers this month
- Services sector expansion, particularly in retail and hospitality, contributed an estimated 0.18 percentage points.
- Manufacturing output stabilized after prior declines, adding roughly 0.07 percentage points.
- Construction activity remained subdued, slightly detracting from overall growth (-0.02 percentage points).
Policy pulse
The Bank of England’s monetary policy stance remains cautious amid persistent inflation near 5%, well above the 2% target. The stronger-than-expected GDP print may reduce immediate pressure for further rate hikes, though the central bank signals readiness to act if inflation proves sticky.
Market lens
Immediate reaction: GBP/USD appreciated 0.40% within the first hour post-release, reflecting improved growth sentiment. UK 2-year gilt yields edged up 5 basis points, pricing in a slightly hawkish tilt. Equity markets showed mixed responses, with the FTSE 100 rising modestly.
December’s GDP growth is a critical indicator amid a complex macroeconomic backdrop. The UK’s inflation rate remains elevated at 5.10% YoY, while unemployment holds steady at 4.20%. Consumer confidence indices improved marginally in December, signaling cautious optimism. Retail sales volumes increased 0.50% MoM, supporting the GDP rebound.
Monetary Policy & Financial Conditions
The Bank of England’s base rate currently stands at 5.25%, unchanged since November 2025. Financial conditions have tightened over the past six months, with credit spreads widening and mortgage rates rising. However, the recent GDP uptick may temper expectations for aggressive tightening in early 2026.
Fiscal Policy & Government Budget
Fiscal policy remains moderately expansionary, with the government maintaining infrastructure spending and targeted tax reliefs to support growth. The latest budget projections forecast a deficit of 3.80% of GDP for fiscal year 2025-26, slightly improved from 4.10% the prior year, reflecting revenue gains from economic recovery.
External Shocks & Geopolitical Risks
Global uncertainties persist, including volatile energy prices and ongoing Brexit-related trade frictions. The UK’s trade deficit widened marginally in December, pressured by higher import costs. Geopolitical tensions in Eastern Europe and East Asia continue to cloud the outlook, potentially impacting supply chains and investor sentiment.
What This Chart Tells Us
The GDP trend is trending upward after two months of decline, indicating resilience amid inflationary and geopolitical headwinds. This suggests the UK economy may be entering a phase of moderate expansion, though risks remain elevated.
Market lens
Immediate reaction: The GBP strengthened against major currencies, with GBP/USD rising 0.40%. UK government bond yields increased modestly, reflecting recalibrated expectations for monetary policy. Equity markets responded positively but cautiously, reflecting mixed investor sentiment.
Looking ahead, the UK economy faces a mix of supportive and challenging factors. The rebound in December GDP suggests a base case of moderate growth around 0.20% MoM in early 2026, contingent on stable inflation and easing supply constraints.
Scenario Analysis
- Bullish (25% probability): Inflation moderates faster than expected, boosting real incomes and consumption. GDP growth accelerates to 0.40-0.50% MoM, supported by fiscal stimulus and improved global trade conditions.
- Base (50% probability): Growth continues at a moderate pace (~0.20% MoM), with inflation gradually declining but remaining above target. Monetary policy remains cautious, balancing growth and price stability.
- Bearish (25% probability): Inflation remains sticky, prompting further monetary tightening. Geopolitical shocks disrupt trade and investment, leading to renewed contraction or stagnation in GDP.
Structural & Long-Run Trends
Longer-term, the UK faces structural challenges including productivity stagnation and demographic shifts. However, investments in technology and green infrastructure may enhance potential growth. The recent GDP rebound should be viewed within this broader context of gradual economic transformation.
December 2025’s GDP MoM growth of 0.30% offers a welcome sign of resilience for the UK economy after two months of contraction. While the data surpasses expectations and hints at a recovery, ongoing inflationary pressures, geopolitical risks, and structural headwinds temper enthusiasm. Policymakers and investors will closely monitor upcoming data for confirmation of this positive trend.
As the UK navigates these complexities, balancing monetary restraint with fiscal support will be key to sustaining growth without fueling inflation. The interplay of domestic policy and external shocks will shape the trajectory in 2026.
Key Markets Likely to React to Gross Domestic Product MoM
The UK GDP MoM release typically influences currency, bond, equity, and commodity markets sensitive to economic growth signals. Traders and investors watch these markets for cues on monetary policy and risk appetite.
- GBPUSD – The primary currency pair reflecting UK economic health and monetary policy expectations.
- FTSE100 – UK equity index sensitive to domestic growth and global risk sentiment.
- EURGBP – Cross currency pair reflecting relative economic strength between the UK and Eurozone.
- BTCUSD – Bitcoin often reacts to macroeconomic uncertainty and risk-on/risk-off shifts.
- HSBA.L – HSBC Holdings, a major UK bank, sensitive to economic cycles and interest rate changes.
Since 2020, GBPUSD has shown a strong positive correlation with UK GDP growth, rising during periods of economic expansion and falling amid contractions. This relationship underscores the currency’s role as a barometer of UK economic health.
FAQs
- What does the UK Gross Domestic Product MoM figure indicate?
- The UK GDP MoM figure measures the monthly change in the total value of goods and services produced, reflecting short-term economic momentum.
- How does the December 2025 GDP compare to previous months?
- December’s 0.30% growth reverses two months of contraction (-0.10% in both October and November), signaling a potential recovery phase.
- Why is the GDP MoM important for investors?
- GDP MoM data influences monetary policy expectations, currency valuations, and market sentiment, guiding investment decisions.
December 2025’s GDP growth of 0.30% MoM contrasts sharply with November’s -0.10% and the 12-month average of 0.05%. The rebound reverses a two-month contraction streak, signaling a potential inflection point in the UK’s economic cycle.
Compared to October’s -0.10%, the December figure suggests improved momentum, driven by stronger consumer spending and stabilization in manufacturing output. The data aligns with recent upticks in retail sales and service sector activity, reinforcing the narrative of a gradual recovery.