- Philip Shaw, an economist with Investec
The UK economy grew less strongly than previously estimated in both the second and third quarters, providing the Bank of England with more reason to remain cautious as it ponders when to raise interest rates from all-time low. The British economy expanded 0.4% in the three months through September, compared with a previous estimate of 0.5%, while annual growth was lowered by two percentage points to 2.1%. Furthermore, growth in the second quarter was revised down more sharply. GDP in the June quarter was downgraded to 0.5% from 0.7%. Weaker growth in the services sector, particularly in financial services, was the main reason behind the new, lower assessment of growth for the July-September period, according to the Office for National Statistics.
In a separate report, the ONS said growth in unit labour costs slowed to an annual 2.0% from 2.2% in the second quarter, while a measure of productivity remained unchanged. The BoE Governor Mark Carney said he wants to see unit labour costs increasing, among other factors, before considering hiking rates. In addition, Britain's current account deficit, considered one of the weak points of the country's economic recovery, remained almost stable in the July-September period at 3.7% of GDP, down from 3.8% in the second quarter. At 17.5 billion pounds, the deficit was lower than a forecast 21.5 billion pounds.
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