Britain’s economy picked up speed ever so slightly in the third quarter, official data showed on Wednesday, strengthening expectations for an interest rate hike next month. Gross domestic product grew by 0.4 percent in the period from July to September, after expanding by 0.3 percent in the preceding three months, the Office for National Statistics said in a statement.
The strongest motor of growth was the service sector, which grew by 0.4 percent compared to the second quarter, driven mainly by the finance sector and computer programming activities, according to the ONS. Strengthening industrial production figures also contributed to growth, outweighing a decline of 0.7 percent in the construction sector. The GDP reading outdid market expectations, which were for growth to match the 0.3-percent figure recorded in the period from April to June.
Analysts said the slight pick-up in growth has increased chances of a rate hike at the next meeting of the Bank of England’s monetary policy committee. “Despite the Brexit headwinds, UK growth is good enough to give the (BoE) the green light for a rate rise next Thursday,” said Ian Stewart, chief economist at Deloitte. The government welcomed the figures ahead of its 2018 budget, to be delivered in a difficult economic and political context. “We have a successful and resilient economy which is supporting a record number of people in employment,” said finance minister, Philip Hammond.
“My focus now, and going into the budget, is on boosting productivity so that we can deliver higher-wage jobs and a better standard of living for people across the country,” he said. Year-on-year growth in the third quarter was 1.5 percent, below the 1.8 percent growth rate recorded over the whole of 2016. Although unemployment is at a 42-year-low, slow wage growth and inflation of around three percent are weighing on consumer purchasing power, while uncertainty over Brexit negotiations continue to cast a cloud over investment and business confidence.
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