UK economy grows at fastest rate in four years

The UK's economy accelerated in the second quarter, carried by strong household and government spending to its fastest annual…

The UK's economy accelerated in the second quarter, carried by strong household and government spending to its fastest annual pace in nearly four years, official figures showed yesterday.

The strongest quarterly growth in consumer spending since the third quarter of 2001 and a rebound in manufacturing left expectations intact for another Bank of England interest rate hike later this year, analysts said.

"With growth well above the economy's long-term potential, there's plenty of reasons for the Bank of England to continue to raise rates, despite what looks like the start of a sustained housing slowdown," said Mr Gavin Redknap, economist at Standard Chartered in London.

The Office for National Statistics said overall growth was unrevised at 0.9 per cent compared with the first three months of the year, to give a 3.7 per cent annual pace in the April-June period, the best performance since the third quarter of 2000.

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The figures came in exactly as analysts had expected and the the ONS also left unrevised the 0.7 per cent quarter-on-quarter growth rate recorded for January-March.

Financial markets shrugged off the data as they supported the existing view that rates were likely to rise to 5 per cent by the end of this year from 4.75 per cent currently, although they are probably close to their peak.

Household spending grew by a robust 1.1 per cent on the quarter in April-June. - (Reuters)