You are here: Home - Saving & Banking - News -

Wedding and weather boost economy as Bank mulls rate hike decision

0
Written by: Lana Clements
10/07/2018
The Royal wedding and sunny weather helped boost the economy in May, but a Bank of England interest rate hike next month is far from a done deal, critics said.

The economy grew 0.3% in May from April, with GDP up 0.2% in the three months to May, according to the Office for National Statistics (ONS).

The government body has changed the way it releases economy updates, with a monthly figure and rolling quarterly figure now released, replacing the previous quarterly updates.

The UK’s dominant service sector drove growth, with construction and production both falling.

ONS head of national accounts, Rob Kent-Smith, said: “The first of our new rolling estimates of GDP shows a mixed picture of the UK economy with modest growth driven by the services sector, partly offset by falling construction and industrial output.

“Services, in particular, grew robustly in May with retailers enjoying a double boost from the warm weather and the royal wedding.”

Bank of England rate rise in the balance

Despite the fillip in growth, experts said a Bank of England rate rise is not a foregone conclusion.

Andrew Wishart, UK economist at Capital Economics, said: “This is the last batch of GDP data the MPC will receive before its meeting on 2 August.

“And while it was a little weaker than expected, note that another 0.3% monthly rise in GDP in June would leave quarterly GDP growth in Q2 at 0.4% – in line with the MPC’s forecast.

“Given the strong set of PMI surveys in June, this seems likely.

“As a result, we think that the figures keep the Committee on track to lift Bank Rate in August.”

However, some critics think policymakers are likely to hold fire.

Ben Brettell, senior economist at Hargreaves Lansdown, said: “Better news on growth brings the Bank of England’s August policy meeting into sharp focus.

“Markets are now pricing in a 78% chance of a rise. But I still think there’s a significant chance of a no change decision.

“The second quarter is likely to see a small uptick in GDP, but when added to the below par first quarter, this means growth in the first half of the year will be decidedly sub-trend.”

Tom Stevenson, investment director for Personal Investing at Fidelity International, added: “The first of a new-style monthly GDP report shows a continuation of an old-style economic story.

“Good weather and a Royal Wedding provided a boost to the services side of the economy in the three months to May but construction and manufacturing remain in the doldrums.

“The overall trend is yet to break out of the downward path it has traced since the beginning of 2017.

“There is nothing in today’s release to suggest the Bank of England will be rushing to raise rates in August.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
family holiday
The essential money-saving guide for your 2018 holiday

Planning a trip away can be stressful, time-consuming and expensive but these are the industry’s top tips to ensure you...

Close