KPMG UK comments on today’s GDP data

“Today’s weak GDP data partially reflects the impact of trade-induced uncertainty that weighed on the economy in April. The effect was particularly pronounced in the manufacturing sector, which saw output contract by 0.9%. Manufacturing activity is likely to remain weak in the near term against a backdrop of sluggish global demand. Weaker activity was also driven by property transactions brought forward ahead of the increase in Stamp Duty in April, as well as weaker wholesale trade.

“While the recently announced trade deals offer businesses a degree of policy certainty, tariffs on UK exports to the US are higher than their pre-April levels. This is expected to act as a headwind for UK trade in the medium term. Moreover, global trade tensions continue to pose a key risk. A disappointing outcome in the US-EU trade negotiations would likely have adverse spillover effects on the UK economy.

"Economic activity is likely to remain sluggish throughout the rest of the year. However, relatively strong households’ balance sheets should support spending and could represent a key source of growth. Consumer spending is projected to pick up in the months ahead, supported by easing borrowing costs as the Bank of England continues to lower interest rates, alongside a backdrop of relatively healthy savings.”