All eyes will be on tomorrow’s GDP figures for the UK economy, with the third and final reading for the second quarter due to be released by the Office for National Statistics (ONS).
Many economists, including Howard Archer of IHS Global Insight, expect quarter-on-quarter growth to be confirmed at 0.7 per cent, although there is the potential for significant revisions to previous readings as the ONS will be amending the national accounts data going back to 1997.
Archer said: “The main changes this time around are expected to show that GDP growth was stronger during 2011-13 than is currently reported.
“Appreciable upward revisions to recent GDP growth would modestly boost the case for an earlier tightening of monetary policy by the Bank of England by indicating that the economy’s upturn has been more solid than previously thought.”
Earlier estimates released in July showed that the UK’s economic growth accelerated to 0.7 per cent in the second quarter, from 0.4 per cent in the first three months of the year, adding to speculation about the timing of an interest rate hike.
A rise in rates would add to repayment costs for borrowers but provide some relief for savers whose nest eggs have been eroded since rates were slashed to 0.5 per cent more than six years ago.
But Bank of England chief economist Andy Haldane recently argued that policymakers may need to cut borrowing costs as their next move rather than raising them.
In contrast, Martin Weale – an external member of the Bank’s monetary policy committee – said earlier this month that “it seems likely to me that the bank rate will need to rise relatively soon”.
As for GDP prospects, Archer said falling industrial production and construction output suggest the UK economy has “hit a soft patch in the third quarter and growth could well dip to 0.5 per cent”.