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UK economic growth revised downwards

The UK economy grew by 0.4% in the third quarter, down from a previous estimate of 0.5%
The UK economy grew by 0.4% in the third quarter, down from a previous estimate of 0.5%

Britain's economy grew less strongly than previously thought in much of 2015, according to official data that may give the Bank of England pause for thought as it ponders when to raise interest rates. 

The UK economy expanded by 0.4% in the third quarter, down from a previous estimate of 0.5%.

The figure was below the forecasts of 35 economists polled by Reuters, who had all expected no change in the figure. 

Weaker growth in the huge services sector, especially in financial services, was behind the new, lower assessment of growth for the three months from July to September, the Office for National Statistics said. 

The Bank of England has previously said it expects growth in the third quarter will eventually come in at 0.6%. 

Most economists have previously said they expect no move by the Bank of England until around May of next year. Financial markets expect no rate hike until late 2016 or early 2017. 

In annual terms, overall economic growth in the third quarter was revised down to 2.1% from a previous reading of 2.3%. 

Economists taking part in a Reuters poll had expected no change to the previous ONS estimates.

Britain has grown more quickly than most other developed economies over the past two years, helping Prime Minister David Cameron and finance minister George Osborne to lead their Conservative Party to an election victory in May. 

A spokesman for the finance ministry said today's data showed Britain was still ahead of most of its peers in terms of growth but also highlighted the risks still facing the economy. 

The UK recovery since 2013 has been driven in large part by spending by consumers. 

The latest data showed household spending rose more quickly than previously thought in the third quarter, helped by the biggest annual increase in disposable income since 2010 as inflation tumbled to zero and wages rose. But the savings ratio fell to its joint lowest level since 1963. 

The ONS lowered its estimate of growth in the three months from April to June to 0.5% from 0.7% in quarterly terms and to 2.3% from 2.4% in annual terms, citing changes to its assessment of inventories. 

Other data released today also suggested Bank of England Governor Mark Carney and his fellow policymakers will not be worried about inflation pressures. 

The ONS said growth in unit labour costs slowed to an annual 2% from 2.2% in the second quarter and a measure of productivity was unchanged. 

Carney has said he wants to see unit-labour costs picking up, among other factors, before thinking about raising rates. 

Also suggesting little pressure on the Bank of England to move, a measures of services growth slowed sharply in October at the start of the fourth quarter. 

Britain's current account deficit, considered one of the weak points of the country's economic recovery, remained almost stable in the July-September period at 3.7% of GDP product, down from 3.8% in the second quarter. 

At £17.5 billion, the deficit was lower than a forecast £21.5 billion in the Reuters poll.