Growth Figures Raise Chances Of Rate Rise

The UK's economy had higher than expected growth in the three months to September - increasing the chances of a rise in interest rates in November....

Gross domestic product (GDP) for the quarter rose by 0.4%, compared with 0.3% in each of 2017's first two quarters, according to latest Office for National Statistics figures.

Services and manufacturing industries grew during the period.

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

The financial markets are now indicating an 84% probability that rates will rise from their current record low of 0.25% when the Bank of England's Monetary Policy Committee (MPC) meets on 2 November.

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

UK economist Ruth Gregory, of research company Capital Economics, said the figures "have probably sealed the deal on an interest rate hike next week".

Deloitte's chief economist Ian Stewart said the figures "show that, despite the Brexit headwinds, UK growth is good enough to give the Bank the green light for a rate rise next Thursday".
Chancellor Philip Hammond said: "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."

The service industry grew by 0.4% from July to September, the same rate as in the previous quarter, making it the biggest contributor to the growth figures.

Computer programming, motor and retail trades were the areas that showed the strongest performance.

Manufacturing expanded by 1% during the quarter - a return to growth after a weak second quarter.

However, construction contracted by 0.7% in the quarter, accelerating from the 0.5% decline recorded in the previous three months.
Will interest rates next week? Analysis by economics editor Kamal Ahmed

The slightly better growth figures will strengthen the arguments of the interest rate hawks on the Bank of England's monetary policy committee.

Next Thursday, the Bank's rate setting committee meets to decide whether to raise interest rates for the first time in more than a decade.

With inflation at 3%, Mark Carney, the governor, has signalled that an increase is on the cards.

And with economic growth more robust than many economists expected, those who support that direction of travel on the MPC will be emboldened.

To be clear, any rate rise will be small. And future rate rises will be gradual.

But the Bank is sending a clear message - slowly, eventually, the period of historically low interest rates is coming to an end.