UK's economic growth accelerates

The World Cup boosted UK TV sales

The UK economy grew at its fastest rate for two years in the second quarter of this year, the Office for National Statistics (ONS) has said.

UK GDP grew by 0.8% between April and June, compared to the previous quarter. Growth of 0.7% had been expected.

This takes the growth rate up to 2.6% and boosts chances that the Bank of England will raise interest rates soon.

Retail sales and a strong housing market were the primary growth engines, figures showed.

Interest rate rise?

The latest inflation figures, released earlier this week, have already added to pressures on the Bank of England to introduce a rate hike.

Inflation rose to 2.5% in June, up from 2.2% in May and well above the government's 2% target.

Economists expect the surge in growth to continue, increasing inflationary pressures and bringing forward the prospect of an interest rate rise.

"There's no reason to think growth will slow in the next six months," said Neville Hill of Credit Suisse.

"We're approaching levels that could generate inflation".

The Bank of England's interest rate-setting committee kept rates on hold at 4.5% for the 11th month in a row last week.

World Cup effect

The ONS figures exceed Chancellor Gordon Brown's forecast for economic growth this year, and the latest figures are likely to boost his standing within the Labour Party.

World Cup shopping fuelled growth, with strong demand for new electrical goods such as TV sets.

For example, sales at the Argos chain rose 7% in the three months to June on the back of strong television sales.

Pubs and hotels saw output increased by 1.2% during the quarter.

Weak output in manufacturing industries contrasted with the strong retail sector.

Warm weather and hosepipe bans saw electricity, gas and water firms experience reduced demand.