UK economic growth picked up in the third quarter of the year to a better than expected 0.4%, according to preliminary figures.
In its first estimate of growth for the three months to September, the Office for National Statistics (ONS) said spending in the dominant services sector continued to be the engine behind the economy’s performance.
However, the fact growth was driven by a pick-up in retail spending and car 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.
The headline growth figure fuelled expectations the Bank will move to make borrowing less attractive and tackle rising inflation next month by raising interest rates from their post-Brexit vote low of 0.25%.
Video: The ‘trade-off’ facing Bank on rates
Sterling – which took a pounding after the EU referendum result – sparked the inflation surge as imports became more expensive.
The pound clawed back a cent against the dollar, trading above $1.32, when the ONS figures were announced as the prospect of a rate rise seemed more assured.
The stats also provided some hope that manufacturers are taking advantage of the weaker pound, which makes UK goods more competitive abroad.
Video: Cheaper pound boosts exports – ONS
Industrial production was up 1% in the third quarter – its best performance for over a year – though construction continued to lag with output down 0.7%.
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.
“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.”
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Shadow Chancellor, John McDonnell, responded: “The UK is not growing as fast as many of our trading partners in the EU or the USA, and it is becoming increasingly clear that this government has to use next month’s Budget for a change of direction.”
John Hawksworth, chief economist at business services group PwC, said: “These numbers do not change the big picture for the UK, 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.
“But we should not overdo the gloom as there is nothing in this or other recent data to suggest that the slowdown is in danger of turning into a recession.
“There is also nothing in these figures that would cause the MPC (Monetary Policy Committee) to hold off on the quarter point interest rate rise that markets expect from their meeting next week.”
Source: SKY News Feed