British economy expands

October 26, 2001 Posted: 1041 GMT

LONDON (CNN) -- Britain's economy grew at a faster rate than expected in the third quarter, despite sluggish U.S. and European growth.

The UK economy, the world's fourth largest, expanded 0.6 percent after a 0.4 percent gain in the second quarter, said National Statistics. Economist expected the rate of growth to match the second quarter number.

Annual growth was 2.2 percent compared with 2.3 percent in the second quarter.

The stronger than expected figure is expected to dampen further interest rate cuts from the Bank of England, which has trimmed rates six times to 4.5 percent this year in a move to counter any recessionary effects from abroad.

The National Institute of Economic and Social Research, a respected think tank, predicted the economy would grow 2.3 percent this year and 2.1 percent in 2002, with little need for further rate reductions.

The UK economy has now had 37 successive quarters of growth since the trough of the 1992 recession. It has grown 30.8 percent since then, according to National Statistics.

A healthy service sector kept the British economy afloat, while manufacturing and industrial production suffered another fall. Services output expanded 0.8 percent on the quarter, slightly down from 0.9 percent in the second quarter, but robust nevertheless.

Within manufacturing, output of hi-tech industries fell again, with electrical and optical equipment showing a third successive significant quarterly fall. That was largely due to a drop in output from the optical networking, mobile phone and electronic valve and tube industries.

British manufacturers are suffering worse conditions than in the country's last recession a decade ago and expect to shed more than 300,000 jobs this year and next, the Engineering Employers' Federation said on Tuesday.

Britain's economy is set to grow around 2.0 percent this year, according to the Bank of England, below the country's average annual growth rate over the past four decades, which is around 2.3 percent.

The government expects the economy to grow between 2.25 percent and 2.5 percent a year.