British consumers picked up the pace of their spending at the end of last year, new figures showed this morning.
The Office for National Statistics said its first estimate for GDP growth in the fourth quarter of 2005 was unrevised at 0.6 per cent but that it had nudged up the annual rate a tenth of a point to 1.8 per cent. Economists had predicted no revision.
Household spending rose by 0.7 per cent in the fourth quarter, its fastest pace in more than a year, lending credence to Bank of England forecasts that consumers are poised to drive economic recovery over 2006.
Expectations of another interest rate cut has already taken a knock this week after minutes of the Monetary Policy Committee's (MPC) last meeting showed no growing consensus for lower borrowing costs.
"If there are any signs that the economy will grow at or above trend, then the MPC will be even more reluctant to cut interest rates again," said Philip Shaw, chief economist at Lehman Brothers.
For last year as a whole, the economy grew by an unrevised 1.8 per cent compared with 3.2 per cent in 2004 and its weakest since 1992 when Britain was emerging from recession.
Household spending growth for the whole year stood at just 1.9 per cent, the weakest in a decade, as soaring household bills, higher interest rates and a slowing property market all took their toll on consumers.
The Bank of England said in its Inflation Report last week that it expected growth to recover to its historical average and consumer spending to pick up steadily.