LONDON, July 20: Britain’s economic growth picked up slightly in the second quarter of 2007, official data showed on Friday, but analysts forecast slower expansion later this year owing to recent interest rate hikes.

The economy grew by 0.8 per cent in the three months to June 30, compared with 0.7pc during the first three months of 2007, the Office for National Statistics said in an initial estimate.

“The main reason for this increase is stronger production and construction output offsetting weaker growth in total services,” the ONS added.

But economists predicted that the five British interest rate hikes since August 2006 would contribute towards slowing growth before the end of 2007.

The ONS said on Friday that gross domestic product (GDP) grew by 3.0pc during the three months to June 30 from the same quarter in the previous year.

The data beat market expectations for quarterly growth of 0.7 per cent and an annual reading of 2.9 per cent.

Britain’s economy had also grown by 3.0 per cent on an annual basis during the first quarter of 2007.

“The main issue is what happens in the second half this year, and a slowing housing market ... and a greater impact of rate increases on consumers should result in economic conditions becoming chillier,” Investec analyst Philip Shaw said.

Global Insight economist Howard Archer agreed.

“We suspect that the second quarter will mark the peak in growth and that it will lose momentum over the second half of the year,” Archer said.

The Bank of England has hiked British interest rates to the current level of 5.75 per cent as it seeks to control growth and keep a lid on rising inflation.—AFP