• Analysis
UK economy GDP growth hits 0.7% in third quarter despite high oil prices
UK economy GDP growth reached 0.7% in the third quarter, the Office for National Statistics said, matching City analysts' expectations even as oil and gas prices surged after the Middle East conflict re-escalated.
Energy costs weighed on growth
The Office for National Statistics said the 0.7% expansion in the three months to the end of September came despite a jump in the cost of petrol, diesel and natural gas following the re-escalation of the conflict in the Middle East, which restricted growth.
The price pressure behind that drag was substantial:
- •Oil rose above $100 a barrel in September and stayed there until earlier this month, though prices have dropped in recent days.
- •Natural gas prices ran at roughly three times their February level, before the attack on Iran by the US and Israel.
- •Petrol costs in the UK climbed above £1.70 a litre, with diesel heading towards an average of £2 a litre.
Rising motor fuel prices were the main driver of inflation this year, the figures indicated.
Monthly picture: a September rise, August cut to zero
Alongside the quarterly figure, the ONS reported 0.2% growth in September, in a boost to Chancellor John Healey. Economists had expected no month-on-month growth for the month, so the reading beat that consensus.
The same release weakened the preceding month: the ONS revised August's growth rate down from 0.1% to zero.
Rates and forecasts under strain
The data lands in a tightening policy environment. Bank of England policymakers voted last week to raise interest rates by a quarter of a percentage point to 4%, aiming to cool inflationary pressures.
The Office for Budget Responsibility, setting out its view at the November budget, said it expected the economy to expand by 1.2% this year - a forecast already looking out of date.
