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| UK economy grows a faster-than-expected 0.8% | UK economy grows a faster-than-expected 0.8% |
| (40 minutes later) | |
| The UK's economy grew at 0.8% between July and September, official figures show, suggesting the economy is recovering faster than expected. | The UK's economy grew at 0.8% between July and September, official figures show, suggesting the economy is recovering faster than expected. |
| It follows 1.2% growth in the second quarter of the year, and is double the 0.4% expected by analysts. | It follows 1.2% growth in the second quarter of the year, and is double the 0.4% expected by analysts. |
| The gross domestic product (GDP) figures released by the Office for National Statistics (ONS) is only a first estimate, and may be revised. | |
| Analysts had expected a slowdown after weak retail sales and housing data. | |
| Government relief | |
| "This is the second major GDP growth surprise in a row and suggests that the UK economy is more resilient than many had feared," said James Knightley, economist at ING. | |
| "The government will no doubt take this as a sign that the private sector can fill the gap created by public sector cuts, but with consumer confidence, hiring intentions surveys and housing activity data all softening we remain cautious." | |
| The pound jumped on the news, which lowered expectations that the Bank of England will engage in further quantitative easing in the near future. | The pound jumped on the news, which lowered expectations that the Bank of England will engage in further quantitative easing in the near future. |
| The pound rose one cent against the dollar, to $1.585, immediately following the data release. | The pound rose one cent against the dollar, to $1.585, immediately following the data release. |
| "Today's data ought to dispel any notion that the Bank of England will implement more quantitative easing in the near term," said Hetal Mehta, analyst at Daiwa Capital Markets. | |
| Building momentum? | |
| The construction sector grew particularly strongly, the data showed, thanks in part to a backlog of work that had been postponed from the beginning of the year due to bad weather. | |
| "It's basically all down to construction again and I think the implication is that that's not sustainable," said James Nixon, economist at Societe Generale. | |
| "The underlying rate is obviously significantly less than these headline numbers would suggest." | |
| The City consensus was wrong on growth and too pessimistic. | |
| Cynics might say no surprises there. | |
| The Treasury will take heart from the robust growth performance even with the first spending cuts beginning to bite. | |
| Manufacturing and services both kept up their momentum. | |
| But that was then: in the period ending in September. | |
| Where we go from here will have a lot to do with how the main government spending squeeze affects the real economy. | |
| Some economists had feared the UK was stalling on the back of spending cut threats. | Some economists had feared the UK was stalling on the back of spending cut threats. |
| Philip Shaw, from Investec Securities, said the prospect of domestic cuts and international uncertainties make it difficult for the UK to "establish proper momentum". | Philip Shaw, from Investec Securities, said the prospect of domestic cuts and international uncertainties make it difficult for the UK to "establish proper momentum". |
| 'Inevitable bounce' | 'Inevitable bounce' |
| And HSBC analyst, Madhur Jha, said households remain worried about the labour market and wealth from the housing market. | And HSBC analyst, Madhur Jha, said households remain worried about the labour market and wealth from the housing market. |
| "At the same time, they want to pay down debt because of the uncertainty surrounding the future outlook of growth," she said. | "At the same time, they want to pay down debt because of the uncertainty surrounding the future outlook of growth," she said. |
| Consumers may have already been worried about the government cuts, he adds. | Consumers may have already been worried about the government cuts, he adds. |
| But Howard Archer, chief economist at IHS Global Insight, warned against reading too much into the third quarter figures, because preliminary ONS estimates can be inaccurate. | But Howard Archer, chief economist at IHS Global Insight, warned against reading too much into the third quarter figures, because preliminary ONS estimates can be inaccurate. |
| Growth was so rapid between April and June that a slowdown was seen almost inevitable. The 1.2% rise in economic output in that period was seen by as a bounce back after a deep recession. | |
| Confidence in the manufacturing and services sectors has dropped due to concerns surrounding the impact of the spending cuts. | Confidence in the manufacturing and services sectors has dropped due to concerns surrounding the impact of the spending cuts. |
| And weaker-than-expected retail sales figures for September added to the concerns, with sales slipping 0.2%. | |
| Meanwhile, the housing market has also started to suffer. Figures released by the British Bankers' Association on Monday showed that the downward trend in the number of mortgage approvals for house purchases had continued in September. | |