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Surprise upgrade to UK growth Surprise upgrade to UK growth
(about 1 hour later)
The UK's economic growth has been revised up for the first quarter of the year after construction data was found to be stronger than earlier estimates The UK's economic growth has been revised up for the first quarter of the year after construction data was found to be stronger than earlier estimates.
Growth for the three months to March was 0.2%, the Office for National Statistics said, a surprise upgrade from the earlier estimate of 0.1%.Growth for the three months to March was 0.2%, the Office for National Statistics said, a surprise upgrade from the earlier estimate of 0.1%.
There was more good news for the economy as separate ONS data showed the services sector grew by 0.3% in April. The pound jumped as speculation grew about the possibility of an interest rate rise later this year.
That was the fastest monthly growth for the sector since November 2017. Against the dollar, sterling rose by about half a cent to $1.3153.
Rob Kent-Smith of the Office for National Statistics said: "GDP growth was revised up slightly in the first three months of 2018, with later construction data, and significantly improved methods for measuring the sector, nudging up growth." Rob Kent-Smith of the ONS said: "GDP growth was revised up slightly in the first three months of 2018, with later construction data, and significantly improved methods for measuring the sector, nudging up growth."
The pound jumped by more than half cent against the dollar in reaction to the data, with sterling up 0.6% at $1.3172. Separate data from the ONS showed that the key services sector - which accounts for about 80% of the UK's economy - grew by 0.3% in April, the fastest monthly rate since last November.
The ONS also showed that the UK's current account deficit narrowed to £17.7bn in the first three months of the year, down from a deficit of £19.5bn in the final quarter of 2017.
'Cautiously upbeat'
Last week, the Bank of England kept UK interest rates on hold at 0.5% but signalled that an August rate rise was more likely than previously thought.Last week, the Bank of England kept UK interest rates on hold at 0.5% but signalled that an August rate rise was more likely than previously thought.
At the meeting, the Bank's chief economist, Andrew Haldane, joined two other policymakers in voting to raise rates to 0.75%.At the meeting, the Bank's chief economist, Andrew Haldane, joined two other policymakers in voting to raise rates to 0.75%.
Following the latest growth figures from the ONS, Ruth Gregory, senior UK economist at Capital Economics, said: "We remain cautiously upbeat about the economy's near-term prospects and continue to think that the MPC will press ahead and raise interest rates at its next meeting on 2 August." Following the latest growth figures from the ONS, Ruth Gregory at Capital Economics said: "We remain cautiously upbeat about the economy's near-term prospects and continue to think that the MPC will press ahead and raise interest rates at its next meeting on 2 August."
The ONS also showed that the UK's current account deficit narrowed to £17.7bn in the first three months of the year, down from a deficit of £19.5bn in the final quarter of 2017. However, economists pointed out that it was not all good news. Household spending increased by a modest 0.2% over the quarter, and the household savings ratio fell from 4.5% to 4.1% - the lowest ratio since the first quarter of 2017 and the third-lowest since records began in 1963.
In addition, business investment shrank by 0.4% - worse than the previous estimate of a 0.2% contraction.
John Hawksworth, chief economist at PwC, said: "We expect UK GDP growth to pick up slightly to 0.3-0.4% in the second quarter of 2018 and to average around 1.3% in 2018 as a whole.
"Growth could pick up a little further in 2019 as real wages recover, but risks are weighted to the downside given uncertainty around the outcome of the Brexit negotiations and the potential threat to global growth from an escalating US-led trade war."
Samuel Tombs at Pantheon Macroeconomics said he expected the economy to expand by 0.3% in the second quarter, with the Bank of England waiting until early next year to raise rates again.