UK economy grows faster than expected

UK economy grows faster than expected

The UK economy grew by 0.7% in the first quarter of 2007 as a strong performance by the service sector and a boost from North Sea oil compensated for weakness in manufacturing, according to government figures released today.

While output from factories was estimated by the Office for National Statistics to have dipped by 0.3% in the first three months of the year, the service sector - which makes up around three-quarters of the economy - expanded by 0.8%.

Although service sector growth was slightly down on the 0.9% recorded in the fourth quarter of 2006, that was offset by a pick-up in production from the UK's North Sea oil fields as a result of the opening of the Buzzard oil field.

Mining and quarrying, which includes oil extraction, grew by 1.4% - its best performance in almost five years.

The quarterly growth rate reported by the ONS was slightly higher than the 0.6% expected by the City and re-enforced the belief that the Bank of England will increase interest rates by a quarter-point next month.

Sterling rose slightly after the release of the preliminary GDP estimates for the first quarter and was trading at just over $2.

The annual rate of growth dipped slightly in the first quarter, from 3% to 2.8%, but was still in line with Gordon Brown's budget forecast of 3% expansion for the economy in 2007.

guardian.co.uk © Guardian Newspapers Limited 2008

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