UK GDP shows higher-than-predicted growth in Q3

Mark Carney governor of the Bank of England

The British pound rose shortly after today's growth report, going up 0.25 percent against the U.S. dollar to $1.317.

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.

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.

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.

Financial markets nudged up the chance of a move to almost 90% from just over 80% before the data. However, its percentage contribution to GDP means its impact on overall growth in the quarter was limited.

"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".

Daniel Hegarty, chief executive officer and founder of Habito, said today's results makes an interest rate hike next week nearly certain: "For most people, the real impact of today's GDP announcement will be felt with the Bank of England's interest rate decision next week".


In the short-term, a further argument in favour of higher rates might come from solid bank lending figures from industry association UK Finance.

The production-side breakdown of GDP showed that services remained the largest contributor to GDP growth, with the 0.4 percent quarterly expansion.

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%.

Another report from the ONS showed that the index of services climbed 0.2 percent in August from July.

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.

Recent comments by BoE rate-setters, interpreted by the market as striking a note of caution with respect to rates, have added to the climate of uncertainty.

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