06:34 AM EDT, 05/15/2025 (MT Newswires) -- Deutsche Bank's Sanjay Raja, chief U.K. economist, noted that the United Kingdom's Q1 gross domestic product growth of 0.7% quarter on quarter beat consensus expectations.

Thursday's higher growth data was driven by a little bit of household consumption, but a whole lot of business investment and exports, said the bank's economist. Indeed, business investment shot up nearly 6% quarter over quarter. Exports were up 3.5% quarter over quarter.

Looking at the detail, it's clear that some front-running of trade was in play, with inventories staying in healthy territory and export growth concentrated in material manufactures. Investment was also focused primarily on transport (aircraft in particular), ICT, and machinery -- all things likely to have been subject to heightened trade uncertainty.

The jump in GDP will likely be short-lived, however, stated Raja. Trade uncertainty will likely hit its peak in Q2 2025. Exporters will likely see reduced demand as well from higher United States tariffs and weaker global demand.

Inventories piled up over the last two quarters will also start to unwind more fully, dragging on GDP. "Crucially," higher unemployment and a drop off in real wage growth won't help household spending much either, as firms continue to tighten payrolls and pass on payroll cost increases, pointed out the bank.

There is some good news, added Raja. He estimates that the U.S.-U.K. Economic Prosperity Deal will shave off a couple of percentage points in the U.K.'s effective tariff rate with the U.S., marginally narrowing the estimated hit from the so-called "Liberation Day" of April 2.

Further trade deals in recent days will also help reduce global trade uncertainty, reducing the drag from a weaker external backdrop. All up, combined with the slightly better Q1 2025 GDP reading, Raja sees some very marginal upside risks to Deutsche Bank's Q2 2025 and 2025 annual GDP projections.

The bank will update its forecasts "shortly."