- Posted by Shyam Gokani in Bank of England, Bremain, Brexit, Currency, David Cameron, Dollar, Economy, EUR, GBP, Inflation, Prime Minister, Referendum, Retail Sales, Sterling, UK
- October 27, 2016
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Britain’s economic growth slowed only slightly in the three months after the Brexit vote, official data showed this morning defying warnings of a heavy hit and further diminishing the likelihood of the Bank of England cutting rates next week.
The economy grew by 0.5 percent in the July-September period, less rapid than the unusually strong growth of 0.7 percent seen in the second quarter but comfortably above the forecast of 0.3 percent.
Britain’s dominant services industries provided all the growth, helped by a boom in the film and television sector as the latest releases in the Jason Bourne and Star Trek series hit the screens along with other blockbusters.
Sterling jumped to a one-week high against the U.S. dollar after the data and the yield on 10-year government bonds hit its highest level since the European Union membership referendum as investors discounted the chance of a BoE rate cut on Nov. 3.
Compared with the third quarter of last year, growth picked up to 2.3 percent, the strongest pace in more than a year, per the preliminary figures from the ONS.
Brexit supporters said the figures backed their argument during the referendum campaign that warnings of a big hit to the economy from a Leave vote were little more than scaremongering.
The central bank is due to decide next week whether to cut interest rates further below their all-time low of 0.25 percent, something it hinted at last month. But Governor Mark Carney suggested this week that he was worried about the sharp fall in the value of the pound and how that will push up inflation.
The GDP data killed the chance of a rate cut next week and could also prompt the Bank’s most stimulus-sceptical policymaker Kristin Forbes to call for an end to its bond-buying.
A poll of economists has shown the BoE is not expected to ease policy until early 2017.
Finance minister Philip Hammond will pay close attention to Thursday’s figures too. He is due to announce his first budget plans on Nov. 23 and has said he could approve higher levels of public spending if needed to help the economy.
He said the GDP data showed the resilience of Britain’s economy but he also warned of tougher times ahead as the country launches into tough Brexit negotiations with the EU next year.