Case grows for interest rate rise

OFFICIAL economic growth figures this week are set to bolster the case for an interest rate hike by the Bank of England’s monetary policy committee (MPC) next month.

The Office for National Statistics is expected to say the economy grew by as much as 0.3 per cent in the three months to the end of May.

The ONS will now start issuing figures for the past quarter on a monthly basis, rather then every 13 weeks.

A 0.3 per cent growth figure will point to a strengthening economy following lacklustre weather-affected growth in the first quarter of the year.

Economists at consultancy Capital Economics said in a note to clients: ‘Overall, we estimate threemonth rolling GDP growth of 0.3 per cent in May.’ They added that it will be the final estimate before the Bank’s next interest rate meeting on August 2 and should give the MPC confidence that the softness of the economy in the first quarter ‘was a blip’.

The influential Purchasing Managers’ Indices – monthly surveys of company executives – have also suggested that GDP for the second quarter of the year grew at twice the rate of the first three months. Bank Governor Mark Carney has said recent data made him confident the slowdown ‘was largely due to the weather’ – his remark prompted the pound to rise against the dollar.

Samuel Tombs of Pantheon Macroeconomics UK said he was expecting growth of 0.2 per cent next week. ‘That should be the minimum the MPC needs to see that the economy is recovering and can press ahead with a rate hike.’