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U.K. economy appears strong
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October 23, 1998: 7:43 a.m. ET
GDP grew 0.5 percent in third quarter, but analysts say bank will still cut rates
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LONDON (CNNfn) - Britain's economy grew faster than had been expected in the third quarter, but analysts believe it wasn't enough to dampen hopes for an interest rate cut next month.
Preliminary government estimates of Gross Domestic Product released Friday indicate a growth rate of 0.5 percent last quarter, above the 0.3 percent that had been expected.
The big surprise was the news from the service sector, showing 0.6 percent growth, unchanged from the previous quarter, according to the Office for National Statistics. It had been expected to slide.
The ONS said industrial output did not fall from its peak a year ago and was showing some signs of expanding.
Britain has now enjoyed 25 successive quarters of growth since the last recession in the second quarter of 1992. The economy has grown 21 percent since then, according to the government report.
The FTSE 100 share index fell about 1 percent on the news as traders worried the Bank of England would decide against interest rate cuts at its next meeting on November 4-5.
But analysts said the economic picture since September in Britain has worsened with the likes of Rover and Ford announcing they would cut production.
"The broad picture shows the economy is growing at much the same pace in the third as the second quarter," said James Capel UK economist Adam Cole.
"Having said that, the leading indicators of GDP are pointing to a very significant slowdown. From here it would appear growth for the final quarter will slow and for the first few months of next year as well."
Standard Chartered treasury economist Claudio Piron said the Bank of England's monetary policy would be influenced by the manufacturing and service sector slowdown since September, as well as falls in average earnings when it makes its decision on interest rates early next month.
"In a sense the figures were a bit more robust than expected but there was the usual culprit of the bad weather conditions which meant the GDP figures were boosted by the utility side. I think we are still very much on for a rate cut despite the figures. With 40 percent of the world in recession it is difficult to see how to come out of this."
Piron expects the Bank of England will cut rates by another 25 basis points when it meets next month.
The Bank cut its key repo rate by a quarter point to 7.25 percent on October 8. 
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