The UK’s economic activity expanded by 0.1% month-on-month in August 2025, reversing a revised 0.1% contraction in July, as production output offset weakness in other sectors of the economy.
Key Points from the August GDP Report
- Monthly GDP grew 0.1%, in line with consensus expectations, following a downwardly revised -0.1% decline in July (previously reported as flat)
- Production sector led the expansion with a 0.4% increase, while services was unchanged at 0.4%, and construction fell by 0.3%
- Three-month rolling GDP growth accelerated to 0.3% (June-August) from 0.2% in the three months to July, suggesting modest underlying momentum
- Annual GDP growth eased to 1.3% from 1.5% in July, indicating some loss of momentum on a year-over-year basis
- Services remained a main growth driver over the three-month period, expanding 0.4%, with construction adding 0.3% while production fell 0.3%
Link to the August 2025 ONS GDP Monthly Estimate
The mixed sectoral performance highlighted the uneven nature of the U.K.’s economic recovery.
While the headline figure met expectations, the flat services reading was concerning, given that the sector accounts for roughly 80% of the U.K. economy. The downward revision to July’s data also suggested the economy had less momentum entering the third quarter than initially thought.
Market Reactions
British pound vs. Major Currencies: 5-min
Overlay of GBP vs. Major Currencies Chart by TradingView
The pound, which had been taking cues from countercurrencies, dipped across the board when the report hit, though losses were shallow. It fell the most against the stronger Aussie, but mostly stayed within 0.10% an hour after the release. Thirty minutes later, the move faded, and the currency started climbing again.
Easing political jitters in France and renewed focus on a possible Fed rate cut boosted risk appetite in Europe, giving GBP a lift before the US session pulled it in different directions.
The European session’s gains also suggest that markets had positioned for potentially weaker data, making the in-line reading a relief. Additionally, the fact that the economy returned to growth after July’s contraction helped ease immediate recession fears, even though the underlying picture remained mixed.
By the end of the day, the pound finished mixed, trading lower against the euro, franc, and yen, but stronger versus the dollar and commodity currencies like the Aussie, Kiwi, and Loonie.
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