According to TD Securities, the United Kingdom's Gross Domestic Product (GDP) increased by 0.1% month-on-month in May, aligning with TD Securities' forecast and surpassing the market's expectation of no growth for the month [1]. The three-month growth rate remains robust at 0.7%, which is the Office for National Statistics' (ONS) preferred measure, indicating ongoing economic resilience [1].
The report highlights that both the services and manufacturing sectors outperformed expectations in May, contributing positively to the overall GDP figures [1]. However, the construction sector acted as a drag on growth during the period [1]. TD Securities projects that GDP is on track for a 0.2% quarter-on-quarter gain in the second quarter, which would represent a significant slowdown from the 0.6% growth recorded in the first quarter [1].
Despite the seemingly solid headline numbers, TD Securities cautions that residual seasonality may be inflating the first-half data, suggesting that the true underlying growth for the second quarter could be closer to zero [1]. This implies that the apparent resilience in GDP may not fully reflect the actual economic momentum, and risks to growth remain for the coming months [1].
CONCLUSION
UK GDP data for May showed a modest 0.1% increase, beating market expectations, with services and manufacturing sectors performing well. However, TD Securities warns that underlying growth may be weaker than the headline figures suggest, with Q2 GDP potentially close to zero. Market participants should remain cautious about the sustainability of the current growth trajectory.