The UK economy stagnated last quarter with real GDP showing no growth, marking a downward revision from an earlier estimate and consensus of 0.1 percent. This flat trajectory continues a lacklustre trend observed since early 2023, with slight downward adjustments in Quarter 2 and Quarter 3 figures. The services sector, typically a cornerstone of economic activity, failed to expand, while a 0.4 percent contraction in production counterbalanced modest gains in construction (0.7 percent).

The economic strain was evident in personal metrics, with real GDP per head declining by 0.2 percent in Quarter 3, quarter-over-quarter and year-over-year. Similarly, household finances saw no growth in disposable income, a stark contrast to the 1.4 percent growth in the preceding quarter. The household saving ratio dipped marginally to 10.1 percent, reflecting potential pressures on disposable income amid static wage growth and inflationary challenges.

This report underscores the UK's loss of economic momentum characterised by stagnant output and weakened consumer resilience. However, today's update only trims the UK RPI and RPI-P respectively to 1 and minus 1, meaning that economic activity in general is at least performing much as expected.

The provisional estimates are expected to be unrevised, leaving total output up just 0.1 percent on the quarter and 1.0 percent on the year.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Since 2018, the first, or provisional, estimate includes the GDP expenditure components as well as data on the main output sectors. These results are updated in the second, and final, report.

GDP is the all-inclusive measure 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. The GDP report 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. These data are readily comparable to other industrialized countries. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.

Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower.

Currency traders prefer healthy growth and higher interest rates. Both lead to increased demand for a local currency. However, inflationary pressures put pressure on a currency regardless of growth. For example, if the UK reports that the consumer price index has risen more than the Bank of England's 2 percent inflation target, demand for sterling could decline. Similarly, when the Bank of England lowers interest rates, the pound sterling weakens. (Currency traders also watch the interest rate spread between countries.)