LONDON – Britain’s economy grew by slightly more than expected in the three months through September, official figures showed Wednesday, making it more likely that the Bank of England could raise interest rates next month for the first time in a decade.
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The Office for National Statistics said that the economy grew by a quarterly rate of 0.4 percent in the third quarter, above economists’ forecasts for 0.3 percent.
The upbeat sign could persuade the Bank of England to raise its main interest rate from the record low of 0.25 percent at its next meeting in November as it tries to bring down inflation, which is currently running at 3 percent, a full percentage point above the official target.
The central bank’s dilemma has been that the British economy has slowed this year, growing at the slowest pace among the Group of Seven industrialized democracies. Higher rates can help rein in inflation but are likely to also weigh on growth.
Darren Morgan, the head of national accounts at the ONS, says third quarter growth was driven by the services industry, in particular by increases in IT, as well as retail sales. Manufacturing activity also boosted the economy.
The figures will buoy Treasury chief Philip Hammond, who is preparing to release the budget next month. A faster-growing economy will boost tax revenues and projections for cash flowing into government coffers, giving Hammond more wiggle room in spending.
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“We have a successful and resilient economy which is supporting a record number of people in employment,” he said. “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.”
Despite the optimism, economists cautioned that the figure was hardly robust. Economist Howard Archer of the EY ITEM Club, said the near term outlook looks “challenging,” because of the ongoing impact of Brexit — Britain’s pending departure from the European Union.
“Consumer purchasing power is still being squeezed appreciably while business concerns and uncertainties over Brexit are likely to limit investment,” Archer said.
