According to the Office for National Statistics, UK GDP is estimated to have expanded 0.4% in the third quarter of the year, marginally beating expectations of a 0.3% rise. This follows rises of 0.2% in the first quarter and 0.3% in the second quarter, and was fuelled by 0.4% rise in the services sector.
Ben Brettell, senior economist at Hargreaves Lansdown, said the growth in the third quarter seems to have increased the likelihood of an interest rate rise next week, with sterling gaining almost half a cent versus the dollar.
“Following recent hawkish comments from the MPC, markets were already regarding a return to 0.5% as a near-certainty,” he said.
“Yet if rates do rise as expected, the move will be largely symbolic – though it will be the first rise in over 10 years. A 25 basis point increase merely reverses last year’s cut – which was arguably unnecessary – and returns rates to where they’ve been for the entire post-crisis period. I expect the bank to proceed with caution from here.”
Adrian Lowcock, investment director at Architas, added that an improving UK economy is good news for domestic companies and should provide support to those companies whose share prices have suffered the most following the Brexit process.
“But investors should keep this in perspective, growth remains low and Brexit negotiations will continue to weigh on investor sentiment,” he said.
