Economy grows at fastest rate in 3 years
The economy expanded at its fastest annual rate in more than three years in the third quarter, showing resilience in the face of a global credit crunch, according to official data on Friday.
Preliminary data from the Office for National Statistics showed gross domestic product grew 0.8 percent from the previous three months, the same as the second quarter, despite forecasts for a slowdown to 0.7 percent.
The annual rate of growth accelerated to 3.3 percent , the strongest rate since the second quarter of 2004, from 3.1 percent in April-June.
The pound rose and interest rate futures fell as investors bet the Bank of England would be in no hurry to cut borrowing costs this year, given signs that consumers and businesses have held up well against this summer's financial market turmoil.
Even the funding crisis at Northern Rock last month, which triggered the first run on a bank in Britain in more than a century, failed to dent demand for consumer services, which made a strong contribution to growth in the third quarter.
"A near-term rate cut looks to be dead in the water after yesterday's strong retail sales report and now a punchy GDP reading," said George Buckely, chief UK economist at Deutsche Bank. "For the time being, upbeat real economy news should keep the BoE on hold for the rest of 2007."
Indeed, policymakers have already expressed concern about the risk of price pressures re-emerging and noted that growth will need to slow to keep inflation in check.
But most economists expect the economy to run out of steam next year as the impact of past interest rate rises, the strong pound and tighter credit conditions resulting from market turbulence this year weigh on demand. ( Reuters )