UK economy expands by 0.6 per cent


The UK economy grew by around 0.6 per cent in the three months to May, new figures show.

The latest estimate of economic expansion from the National Institute of Economic and Social Research (Niesr) was up on the downwardly revised 0.5 per cent growth the thinktank estimated for the three months to April, despite new data showing a drop in industrial output.

Figures from the Office of National Statistics released yesterday showed that UK industrial output fell by 0.6 per cent in April, against an expected rise of 0.3 per cent.

Niesr said that the acceleration in economic growth in the quarter to May showed that the Bank of England should have raised interest rates in order to stem global inflationary pressures.

The bank's Monetary Policy Committee (MPC) yesterday voted to keep the UK's benchmark interest rate at 4.5 per cent for the tenth consecutive month.

Commenting on the increase in economic growth, the Niesr said in a statement: "Seen in the global picture of inflationary pressures this suggests that interest rates should have been raised."

The US Federal Reserve and European Central Bank (ECB) have already increased interest rates in order to ease inflation, with the ECB yesterday raising the eurozone's benchmark rate for the third time since December, to 2.75 per cent.

Amid previous Bank of England warnings that UK inflation could rise above its two percent target within two years if interest rates remain at their current level, economic analysts have predicted that MPC members will follow the example of their overseas counterparts and raise the benchmark rate in the near future.

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