The economy was a little stronger than expected at year-end. However, GDP still contracted 0.1 percent versus November when it expanded a downwardly revised 0.2 percent. The fall was steep enough to put quarterly growth at minus 0.3 percent which, following a 0.1 percent drop in July-September, means that the UK is now in recession. Total output was unchanged from its level a year ago.

The monthly headline decline was mainly due to services where output was down 0.1 percent after a 0.2 percent rise in November. Within this, wholesale (minus 1.9 percent) and other services (minus 1.5 percent) were especially weak. By contrast, industrial production rose 0.6 percent after a 0.5 percent gain, with manufacturing up 0.8 percent for a second successive month. Elsewhere, construction continued to struggle with output declining 0.5 percent, its fifth decrease in the last six months.

Despite the economy holding up marginally better than expected at the end of last year, the arrival of recession will inevitably add pressure on the BoE for an early cut in Bank Rate. However, for now, the persistence of high inflation in services and a core rate that is still more than double the 2 percent CPI target, suggest that a move before May remains unlikely. Today's updates put the UK RPI at minus 8 and the RPI-P at 12. Neither measure is especially far away from zero, but the bottom line is that the real economy is slightly outperforming market expectations while inflation news has been on the soft side.

GDP in the month of December is expected to fall 0.2 percent versus a 0.3 percent expansion in November.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The monthly report is based on output data only as the income and expenditure series are not available.

GDP covers all aspects of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market investors like to see healthy economic growth because robust business activity translates to higher corporate profits. GDP contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. However, the monthly report is quite limited and only provides data on the main output sectors. More detailed information is available in the quarterly reports.