Britain moves out of recession

Economists cautioned that the strong bounce was to some extent a reflection of one-off factors such as the Olympics

Story highlights

  • Britain's double-dip recession ended after the economy grew 1% between the second and third quarters
  • Economists cautioned that the strong bounce was to some extent a reflection of one-off factors

Britain's double-dip recession has ended after the economy grew 1 per cent between the second and third quarters, much more robustly than economists had expected.

The strong rise in gross domestic product will come as a relief to the coalition government, whose austerity programme has come in for fierce criticism as the economy has faltered. Sterling rose 0.5 per cent after the data were released.

David Cameron, the prime minister, who would have seen the figures 24 hours earlier, appeared to hint that GDP figures would be good on Wednesday during prime minister's questions in parliament.

The quarterly growth rate was the strongest in five years, though the economy is still no bigger than it was a year ago. George Osborne, the chancellor, said: "There is still a long way to go, but these figures show we are on the right track."

Economists cautioned that the strong bounce was to some extent a reflection of one-off factors, such as the unwinding of the impact from the jubilee bank holiday, which depressed output in the second quarter, and the Olympics. The sales of tickets alone added about 0.2 percentage points to GDP, the Office for National Statistics said.

Nonetheless, most were expecting more modest growth of 0.6 per cent. They were surprised by the strength of the service sector, which accounts for about 80 per cent of the UK economy, and grew 1.3 per cent in the third quarter. All five sections of the service sector grew.

The output of the production industries, including oil extraction and manufacturing, rose 1.1 per cent. However, output in the small but suffering construction sector fell 2.5 per cent.

Vicky Redwood, an analyst at Capital Economics, said the data could "tip the balance" on the Bank of England's Monetary Policy Committee and persuade them not to renew quantitative easing next month when the current round comes to an end.

However, she said the underlying momentum in the economy was still weak. "As the Olympic effects unwind, it is still possible that the economy contracts again in the fourth quarter. Indeed, the business surveys have been painting a slightly gloomier picture, suggesting that underlying output is still stagnating or even falling slightly."

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