United Kingdom economy beats expectations with 0.4% growth in third quarter

GDP figures

GETTYGDP figures show an UK economy has grown 0.4 per cent

This growth was boosted by the buoyant services and manufacturing industries, which are continuing to go from strength-to-strength.

Shilen Shah, Bond Strategist at Investec Wealth & Investment, said: "Third quarter UK GDP accelerated to 0.4%, above the consensus figure of 0.3%, with some indications that the dominant services sector continues to be in expansionary territory".

However, 0.4 percent is a still below the U.K.'s long-term growth rate, as data suggest 2017 could be the poorest growth year for the British economy since the financial crisis in 2007-2008.

Services remained the largest contributor to overall growth, and the sector's output increased 0.4% in the quarter - the same rate as in Q2 - driven by IT services, motor trades and retail.

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The figures come just over a week before the Bank of England makes a decision whether to raise rates.

This raises the prospect of an interest rate rise when the Bank of England meets on 2 November.

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

The pound was up 0.36% per cent against the U.S. dollar to £1.3179 and 0.27% against the Euro to £1.1188 on Tuesday morning as news of the UK's better than expected growth broke.

The Chancellor, Philip Hammond, said of the performance: "We have a successful and resilient economy which is supporting a record number of people in employment".

According to the ONS, the figures bring the estimated full year growth to 1.5% - meaning that the economy is expanding at a slower rate than in 2016, which stood at an annualised rate of 1.8%.

UK GDP grows by 0.4% quarter-on-quarter but rising inflation seems to be squeezing household spending.

"Yet if rates do rise as expected, the move will be largely symbolic - though it will be the first rise in over 10 years".

Inflation in the United Kingdom has jumped to a five-and-a-half year high at 3%, while wage growth remains subdued. That trend would likely reverse if the BoE increases in the base rate back to its previous level.

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