The British economy has made its way out of recession, posting one per cent growth in the third economic quarter of 2012, official data shows.
The growth was the strongest quarterly GDP performance in five years, Thursday’s data showed.
The jump in growth was subject to a number of temporary factors, including the Olympics, which may mask a weaker underlying picture. But it was still much better than expected and may mean Britain’s full 2012 economy will not be in the red.
The Office for National Statistics said Britain’s gross domestic product rose by 1.0 per cent between July and September, beating forecasts for a 0.6 per cent gain, after shrinking by 0.4 per cent between April and June.
On the year, the economy was flat, also better than expected.
The return to growth after three consecutive quarters of contraction was welcome news for a coalition government under pressure to do more to revive the economy.
However, the third quarter rise was boosted by ticket sales for the London Olympics – which the statistics office estimated accounted for a fifth of the quarterly increase – and a rebound from an extra public holiday in the second quarter.
Discounting those one-off effects, economists said growth in the UK economy was weak and that headwinds from the eurozone were likely to act as a drag in the coming months.
“Overall, it’s a very encouraging result. However, it does come with major concerns about what is going on in the global economy, especially the slowdown in emerging market growth and the European debt crisis,” said Ishaq Siddiqi, a market strategist at ETX capital, to Al Jazeera.
Currency at high
The British currency hit a one-week high versus the dollar and British government bonds extended losses after the data was released.
After falls in unemployment and inflation last week, George Osborne, UK finance minister, said the figures vindicated the government’s economic policies.
“There is still a long way to go, but these figures show we are on the right track,” he said.
“Yesterday’s weak data from the euro zone were a reminder that we still face many economic challenges at home and abroad.”
Mervyn King, governor of the British central bank, however, has said that any economic recovery would be slow, with threats posed by the eurozone debt crisis and a cooling of the fast-growing economies of India, China and Brazil.
However, two of the nine central bank policymakers struck a note of confidence on the economy in interviews with newspapers.
Paul Fisher and Charlie Bean noted that the central bank’s new scheme to get credit flowing through the economy was showing promising signs.
Nevertheless, investors scaled back expectations for another cash boost from the bank as King said policymakers would think “long and hard” before extending the currently approved 375bn pounds of quantitative easing bond purchases.
The ONS said the British economy had grown by 0.3 per cent so far this year, but was still 3.1 per cent below a peak in the first quarter of 2008.
Britain has not fully recovered the output lost during the 2008-2009 slump that has left many in Britain worse off and the economy slipped back into recession at the end of last year.
Output in Britain’s service sector – which makes up more than three quarters of GDP – rose by 1.3 per cent in the third quarter after falling 0.1 per cent in the second quarter. That was the strongest quarterly growth since the third quarter of 2007.
Industrial output was 1.1 per cent higher, the strongest rise since the second quarter of 2010. Construction – which accounts for less than seven per cent of GDP – contracted by 2.5 per cent.