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CORRECTED-UK economy picks up speed in Q3, puts BoE rate hike firmly on track
October 25, 2017 / 9:38 AM / 25 days ago

CORRECTED-UK economy picks up speed in Q3, puts BoE rate hike firmly on track

 (Corrects time period for year-on-year growth in paragraph 9)
    LONDON, Oct 25 (Reuters) - Britain's economy picked up speed
unexpectedly in the third quarter, according to figures on
Wednesday that likely cement expectations that the Bank of
England will raise interest rates next month.
    Quarterly gross domestic product growth rose to 0.4 percent
compared with 0.3 percent growth in the three months to June
2017, the Office for National Statistics said. A Reuters poll of
economists had pointed to growth of 0.3 percent.
    The vast services industry was behind the bulk of Britain's
economic expansion in the third quarter, but manufacturing also
contributed, helped by a rebound in car production.
    Britain performed much better than most economists expected
immediately after last year's vote to leave the European Union,
and was one of the fastest-growing major advanced economies in
2016.
    But it has slipped to the bottom of the pack this year, and
while its peers have enjoyed robust growth, Britain posted its
worst first-half performance since 2012.
    Nonetheless, the BoE is widely expected to return rates to
0.50 percent from 0.25 percent on Nov. 2 after its next meeting,
due to concerns that the economy cannot grow as fast as it used
to without generating excess inflation.
    "Growth in the third quarter continued at a similar rate as
seen in the first half of the year," said ONS head of national
accounts Darren Morgan.
    The figures will also be a small boost for under-pressure
finance minister Philip Hammond ahead of his annual budget on
Nov. 22, who has limited room for manoeuvre because of Britain's
poor productivity performance.
    Growth in year-on-year terms was unchanged from the second
quarter at 1.5 percent in the third quarter of the year,
slightly stronger than analysts had expected.
    Last month the BoE said the preliminary data was likely to
show gross domestic product grew by 0.3 percent in the third
quarter. But growth might be stronger due to improving consumer
demand, it said.
    Britain's dominant services sector grew by 0.4 percent in
the third quarter, maintaining its momentum from the previous
quarter, the ONS said. Industrial output expanded 1.0 percent,
its fastest growth in more than a year.
    Construction continued to struggle, however, contracting by
0.7 percent on the quarter - its sharpest fall since the third
quarter of 2012.
    In August alone, services output increased by 0.2 percent on
the month, offsetting a slight fall in July.
    The preliminary estimates of GDP do not include a breakdown
of spending, and are heavily based on estimated data.

 (Reporting by Andy Bruce and Costas Pitas)
  

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