UK growth at fastest pace in three years

UK economic growth accelerated to its fastest pace in more than three years in the third quarter as the recovery continued across all main industries.

Gross domestic product rose 0.8%, up from 0.7% growth between April and June and the most since the second quarter of 2010, said the Office for National Statistics. The increase was in line with the median of 40 forecasts in a Bloomberg News survey.

Bank of England governor Mark Carney presents new quarterly forecasts on Nov 13 and there are growing expectations officials will concede interest rates may have to increase earlier than forecast in August as momentum builds.

Carney said yesterday there was “traction” in the economy.

“I’m a little surprised it’s only 0.8%, although it’s a very good number,” Brian Hilliard, an economist at Societe Generale SA in London and a former BOE official said. “It does reinforce the recovery is really taking hold. It should make us a little cautious about the fourth quarter because this is probably the sweet spot in the third quarter. It will rein in expectations a little bit.”

Britain is the first of the Group-of-Seven nations to report GDP for the third quarter. The country is experiencing its slowest recovery in a century, having recouped only two thirds of the output lost during the financial crisis.

GDP in the third quarter was 2.5% below its pre-recession high in the first quarter of 2008.

Under its forward-guidance policy announced on Aug 7, the Bank of England has pledged to keep the benchmark rate at 0.5% at least until unemployment falls to 7%, subject to caveats on inflation and financial stability. It projected that to occur at the end of 2016.

Robust job creation over the summer, which has cut the jobless rate to 7.7% from 7.8%, has surprised Bank of England officials, who are now preparing to revise their forecasts for growth, unemployment and inflation.

— Bloomberg