The Office for National Statistics (ONS) has confirmed that the UK economy grew by a full one per cent in its second estimate of GDP for the third quarter.
There is still one more revision due which means there could still be a change but the news confirms that the UK has emerged from its double-dip recession, though the economic outlook remains difficult.
The second estimate showed that the economy contracted by 0.1 per cent compared with the year before. The first estimate suggested the economy was flat. The final confirmation will come next month when all of the economic data is in and a more complete picture of household spending is in.
As it stands this is the biggest quarterly rise in GDP for five years but the economy is still 3.1 per cent below its peak level of activity in the first quarter of 2008.
The ONS said the GDP increased was helped by the biggest rise in consumer spending for two years but with inflation rising there are concerns that this could be short-lived. The run-up to Christmas will be vital to see if this trend continues in the final quarter of 2012.
There were concerns that the service sector figures could be revised down, thus pushing the rise in GDP back from 1.0 per cent. However, it was confirmed that the services sector grew by 1.3 per cent. This is the biggest quarterly increase for two years.
However, industrial output was worse than previously stated. It shrank by 1.1 per cent rather than 0.9 per cent. There was also a slight drop in output from the construction sector.
The GDP figures from the third quarter were helped by a bounce back from the loss of output due to the extra bank holiday for the Queen’s Diamond Jubilee which is thought to have contributed half of the one per cent growth. Olympic ticket sales also contributed 0.2 per cent.
Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The good news is that GDP growth in the third quarter was not revised down from a robust looking 1.0% quarter-on-quarter. Furthermore, it was good to see decent contributions to growth from consumer spending, business investment and net trade.
“The less good news is that this markedly overstates the economy’s underlying performance during the quarter.
“The worrying news is that the economy is currently clearly struggling to avoid a renewed GDP dip in the fourth quarter as consumers are pressurized by a move back up in inflation.”
Early signs for the final quarter are not good as October’s purchasing managers’ surveys for construction, manufacturing and services were weak.
The Governor of the Bank of England, Sir Mervyn King, warned that the economy could shrink in the fourth quarter.
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