UK production output slipped 0.9 percent in July 2025, marking a setback after June's brief rebound (0.7 percent) and extending the volatility seen in recent months. The contraction was led by manufacturing (minus 1.3 percent) and mining and quarrying (minus 2.0 percent), while modest gains in electricity and gas (2.0 percent) and water supply (0.8 percent) softened the blow.

The breadth of weakness across manufacturing is striking as 9 of 13 subsectors recorded declines, signalling broad-based challenges rather than isolated shocks. The steepest drops came from computer, electronic and optical products (minus 7.0 percent), basic pharmaceuticals (minus 4.5 percent), and chemicals (minus 4.6 percent), sectors critical for both industrial supply chains and high-value exports.

This uneven performance points to deeper fragility in the UK's industrial landscape. Energy and utilities provided temporary support, but their resilience could not counterbalance the manufacturing slump. The data suggest that while production remains highly sensitive to sector-specific pressures, the persistent drag from core manufacturing industries risks undermining broader economic stability. This latest update takes the RPI to 11 and the RPI-P to 5, meaning that economic activities adjusted for prices are within the expectations of the UK economy.

Industrial production measures the physical output of the mining and quarrying, manufacturing, gas and electric, and water supply and sewerage sectors. Manufacturing is seen as the best guide to underlying developments as the other subsectors can be highly volatile on a short-term basis. Estimates are largely based on a monthly business survey of roughly 6,000 companies.

Industrial and manufacturing outputs are watched carefully by market participants despite the decline in the importance of manufacturing in the UK economy. Manufacturing output is the preferred number rather than industrial production which can be unduly influenced by electrical generation and weather. The manufacturing index is widely used as a short-term economic indicator in its own right by both the Bank of England and the UK government. Market analysts also focus on manufacturing and its sub-sectors to get insight on industry performance.

Industrial production accounts for less than 16 percent of the economy within which the key manufacturing sector is worth about ten percentage points. Total manufacturing is divided into thirteen sub-sectors, ranging from food, drink and tobacco through chemicals and chemical products to electronics and transport equipment. Consequently, this report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.