06:41 AM EDT, 06/12/2025 (MT Newswires) -- The United Kingdom's gross domestic product was always on a collision course for a course correction after a super-strong start to the year, said Sanjay Raja, Deutsche Bank's chief U.K. economist.

The question was really when and April GDP surprised to the downside on Thursday, noted Raja. The bank expected the economy to flatline -- instead, the economy shrank 0.3% month over month.

Driving the drop in activity was a combination of weaker production, very much consistent with survey data, but a bigger fall in services activity, stated the Deutsche Bank economist. The former was a reflection of weak auto production, machinery, and chemicals. The latter was dragged lower by the big drop in car sales (due to changes in VED), information and communication activities, professional services (mainly legal services), and leisure activities.

Trade activity also shrank sizeably -- suggesting some pullback on potential frontrunning of trade war in Q1 2025.

While headwinds in April will likely soften in the coming months, they won't dissipate fully, pointed out Raja. Despite the U.K.'s trade deal with the United States, trade uncertainty is here to stay.

The labor market continues to loosen too, which will weigh on household spending. Monetary policy remains restrictive, which will also drag on output, he added.

While the U.K. economy has been fairly resilient this year, Deutsche Bank expects GDP growth to track below potential in 2025, before gradually returning to trend next year. Some signs of improvement are already evident in the latest PMIs and business confidence readings.