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UK GDP grows more than expected in 3 months to August


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UK GDP grows more than expected in 3 months to August

The U.K. economy grew more than expected in the three months to August due to positive contributions from the services, production and construction sectors, the Office for National Statistics said.

GDP grew by 0.7% in the three months to August compared with the three months to May, slightly higher than Econoday's consensus estimate of 0.6%. The growth rate in the three months to July was revised up to 0.7% from 0.6%.

"The economy continued to rebound strongly after a weak spring, with retail, food and drink production and housebuilding all performing particularly well during the hot summer months. However, long-term growth continues to lag behind its historical trend," said Rob Kent-Smith, head of GDP at ONS.

Output in the services sector increased by 0.5% in the three months to August, with the wholesale, retail and motor trade sector making the largest contribution to growth for the fourth consecutive month.

Total industrial production rose by 0.7%, mainly due to a 0.8% increase in manufacturing output on the back of strength from pharmaceutical products, food, beverages and tobacco and rubber and plastic products. Construction output was up by 2.9% in the period, driven by increases in repair and maintenance and all new work.

GDP growth was flat on a month-on-month basis in August following an upwardly revised growth of 0.4% in July. Industrial production was up 0.2% in August from the previous month and services output was flat, while construction output declined by 0.7%.

The latest data points to a decent GDP growth in the third quarter, "but with the sunny weather now largely behind us, the question is whether the economy can sustain this better performance," said James Smith, developed markets economist at ING.

Businesses and consumers are expected to be more cautious due to the Brexit-related uncertainty that could slow down economic momentum in the autumn and winter, indicating that the Bank of England is unlikely to raise interest rates before May 2019, Smith said.