The UK's GDP growth inched higher in the third quarter

Emma Haslett
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The UK's GDP growth inched higher in the third quarter of the year, a closely-watched estimate has shown, although it was still well behind other major industrial economies.

The estimate, by the National Institute of Economic and Social Research (Niesr), showed GDP grew 0.4 per cent in the third quarter, up from 0.3 per cent in the second quarter.

Amit Kara, head of UK macroeconomic forecasting at the organisation, said the rise was barely good news.

"Although economic growth is likely to be a touch stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year and this at a time when real GDP growth in other major economies such as the Euro Area and the USA has strengthened," he said.

"Looking ahead, we expect the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth and weaker sterling and away from domestic demand."

However, he also said an interest rate rise had become more likely since its previous forecast.

"At the time of the August forecast, we had not expected Bank Rate to be changed before February 2018, but recent comments from the Bank of England point to a rate increase as early as next month.

"If forthcoming data releases show that CPI inflation has risen again and the labour market remains buoyant, there is a strong chance that the Bank of England will raise the policy rate in November, thereby reversing some of the emergency stimulus that was injected into the economy in response to the EU referendum result.”

Good news and bad news

Earlier today the pound crept higher after figures showed industrial production had risen in the three months to August, strengthened by the manufacturing sector.

However, the Office for Budget Responsibility also slashed its forecast for productivity growth over the next five years, with a new prediction suggesting it will rise 1.8 per cent by 2021.

"The renewed weakness of productivity so far in 2017 may in part be a temporary effect of the Brexit vote and the uncertainty that it has generated. But given the bigger picture – both over time and across countries – it is clear that we will need to revisit our trend productivity growth assumptions again in November," the report said.