The week ahead 22 December 2025 - Signs emerge of a December recovery for the UK economy
What to watch out for in the UK economy and property market this week.
Further evidence emerged last week confirming the UK economy slowed in the run up to the Chancellor’s Budget in late November, although there were also tentative signs of things picking up again post-Budget.
Data showed the labour market continued to slow in October, with the unemployment rate increasing to 5.1%. Also, retail sales declined by -0.1% in November on the volatile month-on-month comparison, although on the more stable three-month measure they increased by 0.6%. Supermarkets have seen sales decline for four months in a row up to November, possibly due to food price inflation having reached the point where it is driving customers away. Supermarkets told ONS they saw low footfall in November. One thing to note is the November figure received a heavy seasonal adjustment to take Black Friday into account (it was in December in 2024). The unadjusted figures showed an impressive 11.9% month-on-month increase in retail sales volume in November.
We have known for some time the economy slowed markedly running up to the Budget. However, it is encouraging to see some initial signs that the situation may have improved in its wake. The December early draft of the UK composite PMI index, a survey of business activity, showed an increase to 52.1, up from 51.2 in November and above the consensus forecast figure of 51.6. The convention of the index is a reading of over 50.0 points to growth for the commercial side of the economy. Also, the GfK consumer confidence index rose from -19 in November to -17 in December. Analysts had been predicting -18. The above requires the caveat that we need to see more data for December before drawing any firm conclusions.
As was widely expected, the Bank of England cut the Base Rate by 25 bps to 3.75% last week, although the vote (at five in favour and four against) was closer than expected. There was though in the accompanying press statement a hint that further interest rate cuts are likely in 2026. Our full analysis of the Bank’s interest rate decision can be found here.
With Christmas approaching, this will be a quiet week for economic news, although the US releases the second draft of its Q3 GDP data. The first draft numbers were robust, although there is currently concern about a slowdown in the US economy, so Wall Street will be looking to see if there is a downwards revision.
This week's figures
Tuesday 23 December
US GDP Growth (second draft), q-on-q annualised, Q3
3.8% previous
3.2% forecast
The first draft of the US GDP figures showed steady growth. Momentum in the economy was good prior to the government shutdown in October and early November, so we remain confident this revision will not see the numbers change greatly.
Thursday 25 December
Christmas Day, 2025
Turkey previous
Turkey forecast
Merry Christmas and a happy New Year to all.
