UK GDP shows higher-than-predicted growth in Q3

GDP figures

"Growth in the third quarter of 2017 continued at a similar rate as seen in the first half of the year".

Ben Brettell, senior economist at Hargreaves Lansdown, said the growth in the third quarter seems to have increased the likelihood of an interest rate rise next week, with sterling gaining nearly half a cent versus the dollar.

Heightened uncertainty and pressure on incomes will continue despite an unexpected increase in economic growth in the last quarter, it's been claimed.

The UK economy grew faster than expected in the third quarter, according to the first estimate released by the ONS this morning.

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 UK's economic growth picked up moderately in the third quarter as GDP increased by 0.4 per cent after the manufacturing sector returned to expansion.

"Both the services sector and the manufacturing sector experienced a rise in output, but the construction sector contracted for the second quarter in succession".

The Monetary Policy Committee (MPC), led by Bank of England Governor Mark Carney (pictured), will meet next on 2 November.

Despite Wednesday's gains, sterling is still trading well down on its value before last year's Brexit vote, when £1 would have bought $1.50 or €1.31.

Daniel Hegarty, chief executive officer and founder of Habito, said today's results makes an interest rate hike next week nearly certain: "For most people, the real impact of today's GDP announcement will be felt with the Bank of England's interest rate decision next week". Responding to the figures, Chancellor Philip Hammond said boosting productivity would be the focus of his budget next month.

"We would like to see more broad-based growth, and are concerned, for example, that the construction sector is now in recession".

The expectation of a rate rise has pushed up swap rates - one of the factors that will determine how lenders price their fixed rates.

Shilen Shah, Bond Strategist at Investec Wealth & Investment, added: "With the year-on-year GDP figure coming in at 1.5%, all indications suggest the Bank of England is likely to increase base rates by 25bps at its November meeting".

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