Computer programming leads GDP growth

UK GDP growth higher than expected at 0.4%

The marginally improved growth from July to September was driven by an expansion in production and services output, but construction continued to act as a drag, the ONS said.

The services sector, which accounts for the majority of the United Kingdom economy "continued to drive GDP growth", the Office for National Statistics said on Wednesday. GDP only rose by 0.3% in both the first and second quarter, partly due to a slowdown in the dominant service sector. Services remained the largest contributor to GDP growth, with a "strong performance in computer programming, motor trades and retail trade", according to the ONS.

The U.K. economy grew by 0.4 percent in the third quarter of this year, beating market estimates, and potentially boosting the chances of a rate hike by the Bank of England.

"The figure may also provide support to the Governor of the Bank of England who is looking to raise interest rates this year and a stronger United Kingdom economy should increase the likelihood of this happening".

Sterling shot up following the release, rising more than 0.3% against both the U.S. dollar and the euro to 1.317 and 1.119, respectively.

"Following recent hawkish comments from the MPC, markets were already regarding a return to 0.5% as a near-certainty", Hargreaves Lansdown senior economist, Ben Brettel, said.




However, UK construction output shrank for the second quarter in a row, by -0.7%, although the industry still remains "well above its pre-downturn peak".

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.

Britain's powerhouse services sector, which accounts for around 79% of the United Kingdom economy, grew by 0.4% during the third quarter, the same rate as the three months before.

"Yet if they do rise as expected, the move will be largely symbolic".

The UK fell to the bottom of the G7 in previous quarters, growing at 0.2 per cent in Q1 and then 0.3 per cent in Q2.

The data comes a week ahead of the BoE's meeting, during which the Bank is widely expected to announce an increase in interest rates for the first time in a decade.

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