TD Securities’ James Rossiter argues that recent UK GDP data may overstate underlying momentum due to problematic seasonal adjustment by the ONS. Using a double-seasonal adjustment approach inspired by the San Francisco Fed, he finds Q1 and Q2 growth inflated and H2 understated, implying 2026 Q1 GDP could be around 0.25ppt lower and later quarters stronger than reported.
Questioning strength in UK growth data
“UK GDP growth out-paced the rest of the G10 in 2025H1, and is again top of the charts for 2026Q1 data released so far.”
“But speculation has risen that there is a growing issue with the ONS’ seasonal factors in recent years, resulting in an over-stating of H1 GDP growth and an under-stating in H2 growth (seasonal factors don’t affect the year as a whole). This can be seen both in the pattern of quarterly growth rates and in the monthly GDP data, which seems to surge in H1 and flat-line in H2 (see 1st and 2nd charts). The ONS has issued an analysis defending its methodologies.”
“We take the approach the SanFran Fed used a decade ago on US GDP data to double-seasonally adjust the data, in essence seasonally adjusting the ONS’ already seasonally adjusted data to look for repeating patterns. Since 2023, the ONS’ seasonally-adjusted GDP series has been more volatile than our double-seasonally adjusted GDP (3rd chart).”
“Double-seasonally adjusting the data yields statistically significant results, and shows increasing positive bias in UK Q1 and Q2 GDP growth estimates, while the Q3 and Q4 growth figures are under-stated (4th chart).”
“Our evidence suggests that reported Q1 GDP growth of 0.6% q/q might be overstated by as much as 0.25ppt. Of course, that means that second half growth might be understated by as much as 0.2ppt in each of Q3 and Q4 this year if seasonal factors aren’t adjusted.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
