U.K. GDP grew by 0.5% in the three months to November, similar to the October estimate and slightly up from the third-quarter reading of 0.4%, said the National Institute of Economic and Social Research, or NIESR.
The service sector and industrial production continue to support economic growth, the NIESR said. By contrast, the construction industry is under pressure. Manufacturing contributed strongly to industrial output due in part to exchange rate effects on exports.
"U.K. economic activity has picked up in the second half of this year and GDP growth at 0.5 per cent is somewhat higher than the economy's speed limit. If, as we expect, the economy continues to expand around this pace and inflation remains elevated, there is a case for the Bank of England to gradually raise the policy rate to stop the economy from overheating," said Amit Kara, head of U.K. Macroeconomic Forecasting at NIESR. "Consistent with that view, our latest forecast for the U.K. is conditioned on a 25 basis points increase in Bank Rate every six months such that the policy rate reaches 2 per cent in 2021.”
Real GDP growth for the fourth quarter of 2017 is estimated at 0.5%.