UK GDP growth pips expectations

Donald Tusk

Donald Tusk

That being said, the CBI data could easily be overlooked tomorrow as European Central Bank (ECB) members gather for the bank's latest rate decision.

Earlier, preliminary data from the Office for National Statistics said that GDP grew by 0.4% in the third quarter of 2017, above expectations of 0.3% growth.

It comes as the Bank's Monetary Policy Committee (MPC) mulls whether to raise interest rates from record lows of 0.25% in November, as inflation continues to soar.

PwC's chief economist John Hawksworth said, "These numbers do not change the big picture for the United Kingdom, which is of an economy that has slowed due to higher inflation linked to the weak pound and Brexit-related uncertainty dragging on business investment".

Nonetheless, most economists polled by Reuters think it would be a mistake for the BoE to hike interest rates now, in part because of the economic uncertainty generated by the Brexit process.

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With inflation at 3%, Mark Carney, the governor, has signalled that an increase is on the cards. "That will clarify the impact of today's results on tax, on wages on the housing market and in the now extreme likelihood of a rate rise". In a separate statement, he said he was focused on boosting productivity - arguably Britain's biggest economic problem - in order to create more higher-wage jobs.

"The Chancellor can not keep hiding from the facts, as his approach of carrying on as usual is seriously putting working people's living standards at risk".

In year-on-year terms, third-quarter growth was unchanged at 1.5%, also slightly stronger than analysts had expected.

The jump in growth over the last quarter appears to have largely been attributed to the UK's service sector, with robust growth in Britain's most significant wealth generating sector helping to offset a decline in other areas. It is possible that if inflation proves stubborn, unemployment continues to remain low, wages start to increase more rapidly and growth strengthens, then rates may rise a little quicker than markets now expect. While services grew by 1%, construction contracted by 0.7%.

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