Hot summer ‘to lift rates’
Rise likely after economic surge
INTEREST rates are set to go up for the first time in a decade after an unexpected summer boost to the economy.
The Office for National Statistics said gross domestic product – the value of everything the country churns out – grew by 0.4% between July and September.
This beat forecasts of a 0.3% rise.
Most analysts said the figures increased pressure on the Bank of England to raise interest rates from their record low of 0.25% when they meet next Thursday.
A rise, tipped to move the rate to 0.5%, would be the first time it has climbed since July 2007 when a 0.25% hike took the level to 5.75%. Ben Brettell, senior economist at Hargreaves Lansdown, said the GDP performance made a rise next week “a near certainty”.
The figures were boosted by a strong performance from the dominant services sector – especially IT and retail – and manufacturing as the weak pound helped exports.
However, the construction sector was negative for the second quarter in a row, meaning it is technically in a recession. Chancellor Philip Hammond said: “We have a successful and resilient economy which is supporting a record number of people in employment.”
But others were more cautious.
Ross Andrews, director of fixed-rate bond provider Minerva Lending, said: “While these numbers are welcome, they are not going to set anyone’s newspaper on fire.
“Consumer confidence was running at a six-month high in September and a fallen pound has lifted the export mood.
“If all we can muster is an acceleration in economic growth that’s so small you could blink and miss it, the Bank of England could still think better of a rate rise next week.”