Britain's economy expanded faster in the first quarter than previously estimated, official figures show.
The economy is on the up, but the spectre of more rate rises looms
GDP rose by 0.7% on the quarter and year-on-year growth was revised upwards to 3.4%, the Office for National Statistics (ONS) reported.
The ONS had previously estimated that the economy grew by 0.6% on the quarter and 3.0% on the year.
The upward revision was largely due to higher estimates for government spending, investment and tax income.
The annual GDP reading was the highest in over three years, helped by a downward revision to the figure for the first quarter in 2003.
However, the latest monthly rise was still slower than the 0.9% pace seen in the last three months of 2003.
But the new figures are bound to lend support to the Bank of England's decision to raise interest rates for two months in a row, taking base rates up to 4.5%.
UK deficit shrinks
Meanwhile, there was more good news for the Chancellor as separate figures from the ONS showed that Britain's current account deficit shrank to £5.3bn in the first quarter.
This was well below economists' estimates of £7.3bn and steady compared with the previous quarter.
Improved trade balance in services and higher investment income were behind the better-than-expected figures.
Commenting on the latest ONS figures, Peter Dixon of Commerzbank Securities said: "The good news is that GDP is now stronger than it was so clearly something is going right.
"It looks like we're on track for 3% plus growth rate this year."
Meanwhile, Andre De Silva of HSBC hinted that the figures could trigger more base rate rises.
"It does suggest there could be more inflationary pressures. Over the next two or three months this could have some outside bearing on monetary policy," he said.
Economists at Capital Economics described the figures as something of a mixed bag, but have nevertheless raised their forecasts for GDP growth this year from 3.0% to 3.3%.
A downward revision to household spending, from 0.9% to just 0.6%, contradicted a 2% rise in retail sales, Capital Economics said, implying that non-retail spending must have been very weak indeed.
But coupled with recent signs of some weakening in consumer confidence and the housing market, the figures should ease concerns over the excessive strength of household activity, it said.
The figures, added Capital, will probably do little to alter the likelihood that the Bank of England will pause for breath in July before raising interest rates again in August.