Published: Fri, October 27, 2017
Markets | By Lucia Cruz

United Kingdom economic growth picks up slightly in third quarter

United Kingdom economic growth picks up slightly in third quarter

Against those headwinds, industrial production has been on a much better footing in Q3, so the overall growth estimate will depend on the extent to which the services sector rebounded in August and September.

According to the Office for National Statistics, UK GDP is estimated to have expanded 0.4% in the third quarter of the year, marginally beating expectations of a 0.3% rise.

The Bank of England is firmly on track to hike interest rates next week, after the United Kingdom economy grew slightly more than expected in the third quarter of the year, according to official figures released on Wednesday (25 October).

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The Q3 outturn was slightly firmer than the average rate of growth seen in H1 2017 (0.3%), which may give some ammunition to those on the Bank of England's MPC who are leaning towards vote for a rise in interest rates in their November meeting.

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

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Speaking during a visit to the Francis Crick Institute, the largest biomedical research laboratory in Europe, the chancellor of the exchequer, Philip Hammond, said: "We have a successful and resilient economy which is supporting a record number of people in employment".

Pressure on the Bank of England to raise interest as soon as next month rose as figures show the United Kingdom economy unexpectedly accelerated in the third quarter of the year.

Peter Dixon, economist at Commerzbank, said that the United Kingdom economy is "running around 0.5 percent per year more slowly than prior to the European Union referendum".

"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". The real question will be how rapidly rates rise through next year going back above the level they were cut to in March 2009 following the financial crisis.

UK GDP grows by 0.4% quarter-on-quarter but rising inflation seems to be squeezing household spending. "The key uncertainty for the central bank is whether it will increase base rates any further in 2018".

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