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BoE Considering Rate Increase

BoE Considering Rate Increase
BoE Considering Rate Increase

UK economic growth probably accelerated in the second quarter, as consumers sustained a recovery that’s pushing Bank of England policy makers to consider the first rate increase in eight years.

 The 0.7% growth forecast by economists in a Bloomberg survey would mark Britain’s 10th consecutive quarter of expansion.

The economy hasn’t experienced such a streak since before falling into recession in 2008.

While the recovery is projected to persist, domestic demand is carrying much of the burden and Bank of England Governor Mark Carney has warned of headwinds that may limit the pace of expansion.

That’s something he and other policy makers will consider as they assess the outlook for inflation and when to increase interest rates.

“The big picture is still that this is a domestically centered recovery,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London.”It’s a bit of a mixed bag, because manufacturing output looks like it’s stalled while industrial production will be relatively firm.”

The Office for National Statistics will publish the GDP report on Tuesday. A first estimate, it will be based on about 44% of the information that will ultimately be available.

In the first quarter, growth was revised up to 0.4% between the first and third publications. Data last week indicate retail sales probably contributed to growth in the second quarter, even after an unexpected decline in June.

While oil boosted total industrial output in April and May, manufacturing output declined amid sluggish growth in the euro area, Britain’s biggest trading partner.

The strength of the pound continues to drag on exports, with even the BoE warning this could have an “adverse impact on the balance of growth in the economy.”

Financialtribune.com