The FTSE 100 closed up 111.3 points at 5,717.5 - its highest for more than two months - despite downward revisions to official estimates of economic growth. The Office for National Statistics (ONS) said the UK economy grew by just 0.4 per cent in the third quarter, not 0.5 per cent as first thought. The year-on-year growth rate was revised down from 2.5 per cent to 2.3 per cent.
Mark Wall of Deutsche Bank said: "The data are weak. The Monetary Policy Committee can justify more rate cuts."
Poor performance in the manufacturing and construction industries lay behind the revisions, the ONS said.
Manufacturing output fell by 0.1 per cent in the third quarter. Construction contracted by 0.7 per cent, with building repairs and maintenance among the worst-hit areas.
Economists were concerned about the build-up in stock inventories, which rose for the seventh successive quarter, the ONS said. Stocks have risen by almost pounds 4.5bn this year.
City analysts warned that companies would start to run down stockpiles next year, which could prompt sharp cutbacks in production schedules.
The lower growth estimates coincided with more bad news on the high street. John Lewis, the retailer, said sales fell 4.7 per cent in the week ending 14 November on the week last year.
However, consumer confidence could be recovering following recent interest- rate cuts, a survey suggested.
Research carried out by GfK, the consultancy, on behalf of the European Commission showed consumer sentiment rallied in November, although it remained at very low levels.
The survey also revealed that consumers have little intention of scaling down on "big ticket" purchases: 26 per cent intend to spend more on major purchases - such as washing machines and TV sets - over the next 12 months than during the last 12 months.
Meanwhile, leading central bankers at a conference in Frankfurt warned of the dangers of targeting exchange rates when determining interest-rate policy. Alan Greenspan, US Fed chairman, said: "The presumption that target zones can be successful is an illusion."Reuse content