BRITISH economic growth has slowed in the third quarter of the year, pushing the prospect of an interest rate rise further back into 2016.
The Office for National Statistics said GDP grew by 0.5 per cent between July and September mainly thanks to the service sector, where output strengthened from 0.6 per cent to 0.7 per cent, and continued consumer spending.
However the overall growth was below the 0.6 per cent predicted and down from the 0.7 per cent recorded in the previous quarter.
Both manufacturing and construction recorded disappointing results in the latest period with output contracting.
It was the third successive quarter where manufacturing contracted with a 0.3 per cent dip this time when compared with the previous three months.
The ONS said an unusually wet August may have been behind the 2.2 per cent decline seen in construction but the sector is believed to have started to bounce back in September.
The weaker performance means any chance of an interest rate rise this year has receded with some commentators now expecting it could be the spring of 2016 before the Bank of England are in a position to start increasing the base rate.
Chris Williamson, chief economist at Markit, said: “The third quarter slowdown, and warning lights from recent business surveys about the weakness intensifying in September, suggests that policymakers will want more time to assess the extent of the slowdown as we move into the fourth quarter, effectively postponing any rate hikes until next year.”
The BoE had previously predicted 0.6 per cent growth in the third quarter.
Schroders economist Azad Zangana expects a rate rise in May next year and said: "The slowdown in UK growth is by no means a disaster, but it will put pressure on the Bank of England to delay the first rate hike, especially as inflation remains in negative territory.”
CBI director of economics Rain Newton-Smith said: “Consumer spending, improving productivity and wages continue to bolster UK growth. But the weaker global outlook, combined with the strength of sterling will keep the pressure on UK manufacturers, as our recent surveys show.”
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