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| UK economic growth tops forecasts | UK economic growth tops forecasts |
| (10 minutes later) | |
| The UK economy grew at its fastest pace in two-and-a-half years during the last three months of 2006, boosted by demand for services, official figures show. | The UK economy grew at its fastest pace in two-and-a-half years during the last three months of 2006, boosted by demand for services, official figures show. |
| Gross Domestic Product (GDP) rose 0.8% in the fourth quarter from the previous three-month period, the Office for National Statistics said. | |
| On an annual basis, GDP increased by 3% from the same quarter in 2005. | On an annual basis, GDP increased by 3% from the same quarter in 2005. |
| Analysts said the quicker-than-expected growth could add to pressure for an interest rate rise later this year. | Analysts said the quicker-than-expected growth could add to pressure for an interest rate rise later this year. |
| 'Above trend' | 'Above trend' |
| The latest figures mean that overall the economy grew by 2.7% in 2006, close to UK Chancellor Gordon Brown's forecast of 2.75% growth, and up from 1.9% in 2005. | The latest figures mean that overall the economy grew by 2.7% in 2006, close to UK Chancellor Gordon Brown's forecast of 2.75% growth, and up from 1.9% in 2005. |
| "This above-trend performance is likely to reinforce the Bank of England's concern about the lack of spare capacity in the economy, thereby adding to the pressure for a further interest rate hike," said Howard Archer of Global Insight. | "This above-trend performance is likely to reinforce the Bank of England's concern about the lack of spare capacity in the economy, thereby adding to the pressure for a further interest rate hike," said Howard Archer of Global Insight. |
| Driving growth at the end of last year was the service sector, which expanded by 1% in the fourth quarter. | Driving growth at the end of last year was the service sector, which expanded by 1% in the fourth quarter. |
| Within the services industry, distribution, hotels, catering and retailers expanded by 1.8%, marking the fastest rate of growth in almost five years. | Within the services industry, distribution, hotels, catering and retailers expanded by 1.8%, marking the fastest rate of growth in almost five years. |
| However, the industrial sector contracted by 0.2% in the last quarter as warm weather limited demand for utilities. Output by electricity, gas and water firms was 2.3% lower. | However, the industrial sector contracted by 0.2% in the last quarter as warm weather limited demand for utilities. Output by electricity, gas and water firms was 2.3% lower. |
| March move? | March move? |
| In separate data on Wednesday, the Bank of England said its rate-setting committee voted by 5 to 4 to raise interest rates in a shock move two weeks ago. | In separate data on Wednesday, the Bank of England said its rate-setting committee voted by 5 to 4 to raise interest rates in a shock move two weeks ago. |
| Analysts said the tight vote suggested a rate rise in February was unlikely. | Analysts said the tight vote suggested a rate rise in February was unlikely. |
| However, on Tuesday, Mervin King, the governor of the Bank of England, warned of the continuing pressure of inflation. | However, on Tuesday, Mervin King, the governor of the Bank of England, warned of the continuing pressure of inflation. |
| His comments came after recent data showed that higher prices had pushed the rate of UK inflation to its highest level in 11 years, reaching 3% in December. | His comments came after recent data showed that higher prices had pushed the rate of UK inflation to its highest level in 11 years, reaching 3% in December. |
| George Buckley, an economist at Deutsche Bank, said that while he did not think that the Bank of England would raise interest rates next month, he felt that there was a need for a further move and it would probably come in March. | George Buckley, an economist at Deutsche Bank, said that while he did not think that the Bank of England would raise interest rates next month, he felt that there was a need for a further move and it would probably come in March. |