GDP growth of 0.4% paves way for rates rise


GDP rose 0.4 percent, a ratio higher than the 0.3 percent seen in the first two quarters of the year.

'With the latest GDP data confirming that the United Kingdom economy is still in a challenging period, these figures are likely to weigh on whether the MPC will raise interest rates next month.

"However, construction output fell for the second consecutive quarter, although it remains above its pre-downturn peak".

He added: "Today's numbers seem to have increased the likelihood of an interest rate rise next week, with sterling gaining nearly half a cent against the dollar".

One rate rise, or more?

But the service sector - which accounts for nearly 80% of the economy's output - had the biggest overall contribution with a 0.4% growth over the quarter.

"If all we can an acceleration in economic growth that's so small you could blink and miss it, the Bank of England could still think better of a rate rise next week", said Ross Andrews from Minerva Lending.

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Chancellor Philip Hammond said that they show a "successful and resilient economy which is supporting a record number of people in employment".

"The Bank argues that inflationary pressures could rise sharply if not checked by higher interest rates, and that the current low unemployment rate could lead to much faster wage growth". Production and agriculture both grew by 1.0% but contributed less percentage points to overall GDP growth due to their weighting.

However he acknowledged there was nothing in this or other recent data that suggested the slowdown was in danger of turning into a recession or a shorter timetable for the expected interest rate rise.

In particular, computer programming, motor traders and retailers were the businesses that showed the strongest performance.

"Despite the Brexit headwinds, United Kingdom growth is good enough to give the (BoE) the green light for a rate rise next Thursday", said Ian Stewart, chief economist at Deloitte.

The economy grew by 1.5% in year-over-year terms that quarter, above expectations of 1.4%.

The eurozone's growth rate also caught up with the United Kingdom in 2016, and has outpaced the United Kingdom so far this year.