UK GDP beats expectations, sterling reacts

Pictured: London bridge

The UK economy expanded more than expected in the third quarter, at least according to preliminary GDP data released on Wednesday.

The report, released by UK’s Office for National Statistics, announced a 0.4% increase, while the average expectations were for a 0.3% growth.

The GDP figures are a first estimate and are based on about 44% of the total data that will ultimately be available.

The services industry was a bit behind the bulk of Britain’s economic expansion in Q3, but manufacturing also contributed, helped by a rebound in car production. Construction didn’t look that good though, deflating 0.7% – its worse fall since the third quarter of 2012.

The pound strengthened on the data and as of 9:40 am on Wednesday it was 0.2% up to 1.3165 against the Greenback.

The upbeat report will probably increase the speculations about the Bank of England unveiling a rate hike on their Nov 2nd meeting. Traders are weighing in an 85% chance of an increase of the interest rates to 0.5% from the current 0.25%.

While the latest quarter went better than expected, growth is still running at a weaker pace than it was in 2016. UK is behind the curve of global markets expansions, too. On an annualized basis, the UK economy grew 1.6% in the last three months, compared to the 2.5% expansion in the US.

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