Britain's economy grew at its fastest quarterly rate in two years in the last three months of 2006, official data showed today.
The Office for National Statistics said that GDP rose by 0.8 per cent in the October-December period, the highest since Q2 2004 and beating analysts' forecasts for 0.7 per cent growth. It compared with 0.7 per cent growth in the third quarter of the year.
That put the annual rate at 3.0 per cent, the fastest rate of growth since Q3 2004, outstripping analysts' forecasts for 2.9 per cent. Separately, minutes to the Bank of England's January meeting showed policymakers voted by the narrowest of margins, 5-4 to raise interest rates this month.
The pound tumbled and interest rate futures rose, as did the FTSE-100 index of leading shares, as investors speculated borrowing costs may be nearing their peak. "On balance the economic data is still robust, 0.8 percent is a strong number, although it's all generated by services," said George Buckley, economist at Deutsche Bank.
"Taken together it does suggest the MPC won't move in February, but I still think there is a need for a further move and they'll go in March." In 2006 as a whole, the economy expanded by 2.7 per cent, a marked improvement from the 1.9 per cent recorded for 2005 and virtually in line with finance minister Gordon Brown's forecast for expansion of 2.75 per cent.
Growth was driven by the services sector, which expanded by 1.0 percent in the fourth quarter. Within that, distribution, hotels and catering, which includes the retail sector, grew by 1.8 per cent - the fastest rate of growth in nearly five years.