Economy

British pound gains on better-than-expected UK Q3 GDP

Governor Mark Carney indicated to the BBC last month that rates could rise in the "relatively near term".

Head of national accounts at the ONS, Darren Morgan, said: "Growth in the third quarter of 2017 continued at a similar rate as seen in the first half of the year".

The Office for National Statistics said United Kingdom gross domestic product expanded 0.4% in the third quarter compared with the previous three months, an annualized rate of 1.6%.

However, the fact growth was driven by a pick-up in retail spending and vehicle sales will intensify worries at the Bank of England that people are living beyond their means as unsecured consumer debt levels hover around pre-crisis highs at £200bn.

"I expect the Bank to proceed with caution from here", says Brettell, who adds the move would only return rates to where they've been for the entire post-crisis period.

Although a 0.4% rise in quarterly gross domestic product wasn't strong enough to boost annual growth, after two quarters of 0.3% gains it shifted the needle on interest rate expectations.

The stats also provided some hope that manufacturers are taking advantage of the weaker pound, which makes United Kingdom goods more competitive overseas.

Industrial production rose in July and August but construction output fell.

"We have a successful and resilient economy which is supporting a record number of people in employment", Hammond said in a statement.

"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".

"GDP growth, however, is liable to slow again over the next couple of quarters".

Peter Dixon, economist at Commerzbank, said that the United Kingdom economy is "running around 0.5 percent per year more slowly than prior to the European Union referendum".

And that brings us to the broader concern. 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.

As output grows to 0.4%, comments come into the IFA Magazine office.

One question economists will be asking themselves is whether this is the new normal: is Britain transitioning to a lower normal rate of growth?

Most economists expect that the economy will deteriorate further next year if the United Kingdom appears to be heading for Brexit in 2019 without a transition deal that would keep Britain effectively in the customs union and the single market. And less tax revenue in turn means the potential for more austerity.

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".



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