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Service industries boosted the UK's economy despite a flagging manufacturing sector, official government statistics revealed today.

Figures from the Office for National Statistics show that the UK's gross domestic product (GDP) rose by 0.7 per cent in the first quarter of 2007, in line with overall expectations.

Although the volume of output in the production industries was unchanged manufacturing fell by 0.3 per cent, however.

The UK's economy was also boosted by the output of the service industries which increased by 0.8 per cent.

Despite increased rates on borrowing by the Bank of England in the past year household expenditure rose by 0.6 per cent, the research showed.

Yet economists predict recent interest rate hikes from the Bank of England will cause the economy to flag in the next quarter.

"We expect growth to lose a little momentum overall during the coming months as the upside for consumer spending is limited by higher interest rates, modest real disposable income growth and rising debt levels," commented Howard Archer of research firm Global Insight.

The firm also predicted that further interest rate hikes could be carried out in the next few months, as early as June, to insure against medium-term inflation risks.

Mr Archer also noted the "ever-growing danger that interest rates will reach six per cent before the end of the year".