UK GDP Growth Rises Unexpectedly In Q4

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Update: The pound has continued its strong run against the dollar after news of a better-than-expected performance from the United Kingdom economy in the last three months of 2017.

Gross domestic product grew at its fastest pace of the year, rising by 0.5 percent from the previous three months.

The ONS also revealed that the United Kingdom index of services for the three months to November grew 0.4% as economists predicted, up from the 0.3% growth in the previous three month period.

Another report from the ONS showed that the index of services climbed 0.4 percent month-on-month in November, which was the biggest expansion since August 2016.

The UK, he said, was suffering from a short-term "Brexit effect" - with the economy expected to be down 2% at the end of 2018 compared with what had been expected before the time of the European Union referendum in 2016.

Sterling added to its recent strong rise against the USA dollar and also climbed against the euro.

However, sterling picked up by around 0.3 per cent to $1.4283 in the wake of the data, suggesting that many traders expect the stronger figure to prompt the Bank of England into raising interest rates again sooner.

The BoE said last month it expected the economy might have slowed slightly in late 2017.

Policy makers will announce their next policy decision, as well as unveil new economic projections, on February 8.

The better than expected GDP number on Friday creates something of a dilemma for the Bank of England, which is expected to increase its base rate of interest at least once in 2018, having hiked for the first time in a decade in November 2017.

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"But there is the prospect this year, as there is greater clarity with the relationship with Europe and subsequently with the rest of the world, for a conscious recoupling of the United Kingdom economy with the global economy".

Earlier on Friday, Bank of England governor Mark Carney said he could see a "conscious re-coupling" between the United Kingdom and the booming world economy.

The Office for National Statistics said GDP was estimated to have increased 1.8% between 2016 and 2017, slightly below the 1.9% growth seen between 2015 and 2016.

"The boost to the economy at the end of the year came from a range of services including recruitment agencies, letting agents and office management". Manufacturing also improved, though construction weakened.

The world economy is accelerating and the United Kingdom is not benefiting from it, he said.

The OBR has forecast United Kingdom growth this year to slow to 1.4 per cent and 1.3 per cent in 2019, reflecting weaker household consumption due to higher inflation and weak investment from firms due Brexit-related uncertainty.

Growth was expected to be 1.4%.

Elsewhere in the services sector, there was no contribution to growth from distribution, hotels and restaurants, which experienced its worst growth since the final three months of 2010.

Manufacturing growth contributed to a 0.6 per cent rise for production industries over the quarter, but that was partly offset by a "significant" fall in oil and gas extraction following the temporary shuttering of the North Sea Forties pipeline over the bulk of December.