Britain’s economy is doing better than thought, with growth accelerating to 0.4pc in the third quarter of the year, adding to expectations of an imminent interest rate hike.
Economists thought the recent slowdown would leave GDP growth stuck at 0.3pc for the third consecutive quarter, but strong manufacturing growth and a steady expansion in the services industry pushed the economy upwards.
The improvement provides Mark Carney and his colleagues at the Bank of England with another reason to vote for an interest rate rise when they meet next week.
“Growth in the third quarter continued at a similar rate as seen in the first half of the year,” said Darren Morgan, head of national accounts at the Office for National Statistics, which published the data. "Services, led by increases in IT, motor trades and retail, continued to drive GDP growth.
“Manufacturing also boosted the economy with an improved performance after a weak second quarter. However, construction output fell for the second consecutive quarter, although it remains above its pre-downturn peak.”
Over the past 12 months GDP grew by 1.5pc, the joint-slowest rate since 2013.
On an annual basis, construction output is up 2.8pc and manufacturing 2.7pc. The services sector grew by a more underwhelming 1.5pc on the year.
Unemployment has been falling despite the modest pace of growth. In August - two months into the third quarter - joblessness dipped, staying at a 42-year low of 4.3pc. But record high employment does not appear to have boosted output substantially, indicating that the productivity crunch is continuing.
GDP per head rose 0.3pc in the quarter.
Analysts believe the economy is now on a modest upward trajectory, indicating the slowdown may be over.
"The third quarter figures leave the economy on track to grow by about 1.6pc this year," said Ruth Gregory at Capital Economics. "Looking ahead, with inflation likely to fall in 2018, the worst of the real pay squeeze should soon be behind us."
"And sterling’s decline, along with robust global growth, should boost net trade over the coming quarters. As such, we continue to think that growth will be a reasonable 2pc or so in 2018."