Rate rise ‘not likely’ as UK growth loses momentum

CONFIRMATION of slowing momentum in the UK economy is likely to put paid this week to any lingering hopes among savers that a rate rise is on the way.

Dovish speech: Andy Haldane. Picture: Neil Hanna

Economists say the first official estimate of gross domestic product, due on Friday, is likely to show that growth slowed during the third quarter of 2014.

Most expect a still healthy reading of around 0.7 per cent, compared to the upwardly revised 0.9 per cent rate recorded in the three months to the end of June.

Philip Shaw, at Investec, said: “The signs are that growth softened modestly in the third quarter. Manufacturing grew by just 0.1 per cent in August, while construction experienced a curious slide of 3.9 per cent during the month.

“It is not impossible that GDP growth is maintained at +0.9 per cent, but realistically this would require another quarter of service sector growth of more than 1 per cent, which while not unfeasible, looks optimistic.”

Along with falling ­inflation, the expected slowdown in the economy was cited by Bank of ­England watchers as they almost unanimously pushed back their predictions for a rate rise from next month, to next year.

Following a dovish speech by the bank’s chief economist Andy Haldane on Friday, many now expect the monetary policy committee to sit on its hands until after the general election, rendering minutes of the group’s October meeting relatively academic when they are published on Wednesday.

Howard Archer, chief UK economist at IHS Global Insight, said the hot topic will be the presence or otherwise of signs that the more hawkish MPC members are becoming less convinced of the case for a rate hike.