British economy grows slower than expected

23rd December 2015, Comments 0 comments

Britain's economy grew slower than expected in the third quarter, revised official data showed Wednesday, denting the prospect of a hike to British interest rates early next year.

Gross domestic product (GDP) expanded by 0.4 percent in the July-September period, down from previous estimates of 0.5-percent growth, the Office for National Statistics said in a statement.

The data also revealed a slowdown compared with the second quarter, which came in also weaker than expected after a revision downward.

Analysts had forecast a revision higher in third-quarter GDP to 0.6 percent following some robust pre-Christmas retail sales data.

But a Treasury spokesman said in a statement Wednesday that the latest growth figures "highlight that risks remain" to the British economy despite it growing favourably compared to its eurozone neighbours.

GDP for the second quarter was meanwhile revised down to 0.5 percent from 0.7 percent, the ONS added.

Analysts said the data could delay the Bank of England in following the Federal Reserve by raising interest rates from record-low levels.

"Downwardly revised GDP growth... will likely increase expectations that the Bank of England will not be raising interest rates until well into 2016," said Howard Archer, chief European economist research group IHS Global Insight.

He added that the Bank of England may carry out only one rate hike next year, by a quarter point to 0.75 percent.

"The fact that interest rates have been so low for so long means that even a small rise could significantly affect consumer and business psychology and behaviour," Archer cautioned.

The Bank of England's main lending rate has been stuck at 0.5 percent for almost seven years.

Last week, the Federal Reserve raised its key rate for the first time in almost a decade, in a move that pointed to a healthier outlook for the world's biggest economy.

© 2015 AFP

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