UK economy grows twice as fast as expected in Q3

The ONS says GDP was up 0.8% last quarter - well below the Q2 figures, but still double City forecasts.

by James Taylor
Last Updated: 19 Aug 2013
Good news for the Coalition, in a week when there's been lots of talk about their growth strategy (or lack thereof): the Office for National Statistics said today that the UK economy grew 0.8% in the third quarter. This might not sound a lot - and it's a marked slowdown from the 1.2% recorded in Q2. But since most economists had been expecting growth of around 0.4%, this represents a surprisingly positive result. So, a sign that we're heading back towards the sunlit economic uplands? Or just the calm before the storm?

As always with these GDP figures, this is just a first estimate that will probably end up being revised later. Nonetheless, this is the second quarter in a row where growth has been well above expectations - suggesting that the UK economy isn't quite the basket case some would have us believe (some analysts had actually pencilled in a fall in GDP, which was clearly well wide of the mark). According to the ONS, the construction sector was the big driver of growth, up 4% thanks to a load of work that was postponed from the beginning of the year, when the weather was bad.

Of course, the problem is that a big jump like this inevitably distorts the overall figure - and it's unlikely the construction sector is going to keep pulling numbers like these. Equally, the reason for the low forecasts was that all the rest of the economic data - retail spending, consumer confidence, house prices, hiring intentions and so on - looked so unremittingly grim. Perhaps these data just hasn't haven't fed through to the GDP figure yet. One thing's for sure: many people won't feel like they're living in an economy that's growing at such a (relatively) healthy rate. And that's before we start to feel the impact of all those cuts announced last week.

But perhaps we should look on the bright side. The economy is now nearly 3% ahead of where it was this time last year, having enjoyed its strongest six months of growth (in percentage terms) since 2000. The pound jumped on the news, because it makes another round of quantitative easing less likely (at least for now). And it also generates a bit of optimism about the UK's economic prospects - something that will be absolutely vital if we are going to achieve the kind of private sector growth the Government needs to make its numbers add up over the coming years. So unless you're an Opposition politician, it's hard not to see this as a positive sign.

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