UK economy recovers in autumn

07-11-2006

UK economy recovers in autumn
Britain's economy is showing strong growth which will be sustained through to the end of the year, a finance forecaster has predicted.

The National Institute of Economic and Social Research (NIESR), publishing its assessment of UK GDP in the three months to October this year, shows that rolling quarterly growth has increased from 0.4 per cent in September's results to 0.7 per cent in last month's results.

A dip in the services sector in July had diminished September's quarterly result, but there was no such dampening effect on October's growth, a statement from the NIESR said.

"The economy continues to grow at just above trend. Our forecast shows that interest rates need to be raised now and probably again in February," the NIESR said.

The Bank of England increased interest rates from 4.5 per cent, where they had been held steady for 12 months, to 4.75 per cent in August but the hike did little to ease rising inflation.

Following last month's decision by the monetary policy committee (MPC) to hold the base rate at 4.75 per cent, economists are widely predicting a second hike this year to five per cent after the MPC meets on Thursday.

An analysis of the UK economy published at the end of last month by the NIESR said that inflation would increase to 2.6 per cent in the final quarter of 2006, but would drop back to the chancellor's target of two per cent by the end of next year.


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