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UK economy picks up speed
LONDON, England -- The UK economy expanded at a faster-than-expected pace in the third quarter of this year, as the manufacturing and service sectors showed signs of resurgence. The strong third-quarter growth in gross domestic product, the biggest quarterly rise in more than two years, may ease calls for the Bank of England to cut interest rates in the coming months. The Office for National Statistics said GDP grew by 0.7 percent in the third-quarter from the previous three-month period and expanded by 1.7 percent from a year earlier. Analysts had expected month-on-month growth of 0.6 percent in the third quarter, the same pace as in the previous quarter. "The numbers are stronger than expected and show the services sector expanded at a reasonably healthy rate in the third quarter,'' Mark Miller, UK economist at Morgan Stanley, told Reuters. "They are likely to take off a little bit of pressure for a rate cut, although November's decision will be finely balanced. For choice, we think rates can be left on hold at 4.0 percent.'' The Bank of England has left its key lending rates at 4 percent -- the lowest level in 38 years -- since last November, after cutting borrowing costs seven times last year in an effort to reverse the economic downturn. The ONS said the service sector -- ranging from distribution, hotels and catering industries -- grew by 0.8 percent in the third quarter from the previous quarter and by 2.2 percent year-on-year. This was the fastest growth rate since the first quarter of 2001. Growth in the service sector was attributed to increased activity by retailer and hotel operators. Post and telecommunications industries were also stronger. The ONS said manufacturing, energy and water supply output also increased in the third quarter but mineral extraction was lower. "One should note that the figures were pushed up by the [Queen's] jubilee-related bounce-back in manufacturing output in July and that the underlying pace of growth in the UK economy is still likely to be below trend," Philip Shaw, an economist at Investec, told Reuters.
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