The UK economy has exceeded expectations by growing at 1.1% in the second quarter, which equates to its fastest rate increase in four year, say official figures released today.
The primary estimate for gross domestic product from April to June showed growth twice as fast as the 0.6% widely expected by economists and four times faster than the 0.3% seen during 2010′s first quarter, according to the Office for National Statistics.
The news marks the third successive quarter of growth, its most substantial yet, since the economy emerged from recession in the last quarter of 2009.
It appears growth was driven by the UK’s powerhouse services sector which comprises of three quarters of the economy and saw its best quarter in more than three years with growth of 0.9%.
The new figures will provide argument for those at the Bank who believe interest rates should rise soon to restrain inflation. Recent discussions had seen the more conservative majority on the monetary policy committee had successfully argued what the fragile economic recovery needed rates to stay as low as possible.
Howard Archer of IHS Global Insight said: “The prospect of an interest rate hike before the end of the year has just jumped while further stimulus is now looking less likely”.
Interest rates futures on money markets reacted violently with two-year swaps rising from 1.35% in early trade to 1.43% by 1pm. The price had dipped to an all time low of 1.345% earlier this week, which eased any inflation fears which may of been lingering. The news released from the Office of National Statistics today reverses that trend.