UK Q3 GDP growth beats expectations

UK Q3 GDP growth beats expectations

On an annual basis, construction output is up 2.8pc and manufacturing 2.7pc.

The U.K.'s economy grew unexpectedly in 2017's third quarter, according to data revealed on Wednesday by the country's Office for National Statistics (ONS).

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).

However, although the GDP data was better than expected it is not strong and there are pockets of weakness that could come under even more pressure if the BoE does hike interest rates.

"Quarterly economic growth was estimated to have picked up slightly from 0.3 per cent in the first two quarters of the year, to 0.4 per cent in the third quarter", said Danske Bank Economist Conor Lambe.

The Bank of England's Monetary Policy Committee last lifted rates in July 2007, taking the base rate to 5.75 per cent before the financial crisis caused it to plummet.

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Shilen Shah, Bond Strategist at Investec Wealth & Investment, added: "With the year-on-year GDP figure coming in at 1.5%, all indications suggest the Bank of England is likely to increase base rates by 25bps at its November meeting".

The pound clawed back a cent against the dollar, trading above $1.32, when the ONS figures were announced as the prospect of a rate rise seemed more assured.

Today's healthcheck on the United Kingdom economy is particularly important, as chancellor Philip Hammond weighs up what tax and spending changes to make in November's budget. This is mainly due to the fact that the majority of new mortgages taken out in recent years have been fixed rate deals that protect homeowners from higher monthly payments when interest rates rise.

The UK fell to the bottom of the G7 in previous quarters, growing at 0.2 per cent in Q1 and then 0.3 per cent in Q2.

"If the MPC doesn't raise interest rates on 2 November following this preliminary GDP estimate, Mark Carney will be branded as the central banker who cried wolf once too often".

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