UK economy grew much faster than expected in Q2, bolstering chances of an interest-rate hike
- The UK economy grew much more than previously thought in the second quarter.
- GDP grew 5.5% in the quarter, compared with a previous estimate of 4.8%.
- Economists said this bolsters the case for the Bank of England to raise interest rates sooner than expected.
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The UK economy grew much faster in the second quarter than previously estimated, new figures have shown, bolstering the case that the Bank of England will raise interest rates sooner rather than later.
UK gross domestic product rose 5.5% in the period from April to June, the Office for National Statistics said on Thursday, an upward revision from a preliminary estimate of 4.8%. By contrast, the economy contracted 1.4% in the first quarter.
It leaves the level of UK GDP - the most common way of measuring the size of the economy - 3.3% lower than before the pandemic.
The Bank of England last week said the case for cutting stimulus and raising interest rates was growing, in response to stronger-than-anticipated inflation.
Thursday's strong GDP growth reading adds to the case that the UK economy does not need as much support from the the central bank, economists said.
"Today's release suggests the economy is closer to its pre-pandemic level than we had previously thought and raises the risk that the Bank of England hikes interest rates sooner than our forecast of May 2022," Ruth Gregory, senior UK economist at Capital Economics, said.
Britain's economy grew rapidly over the summer as the rollout of coronavirus vaccines and the loosening of lockdown restrictions boosted businesses and consumer spending.
The ONS said the second-quarter GDP upgrade was partly because the health services and the arts sectors performed better than initially estimated. It also underscores the difficulties of collecting accurate data at such a volatile time for the economy.
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