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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. Meanwhile rating agency Standard and Poor's upgraded its outlook for the UK's triple-A credit rating.
Chancellor George Osborne called both reports "a vote of confidence in the new government's economic policies".
The gross domestic product (GDP) figure 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.Analysts had expected a slowdown after weak retail sales and housing data.
Government reliefGovernment 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."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 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."
But Chancellor George Osborne said that, along with the government's spending review announced last week, the ONS data should help underpin confidence in the UK economy. But Chancellor George Osborne said that, along with the government's Spending Review announced last week, the ONS data should help underpin confidence in the UK economy.
"The ONS believe that the underlying growth in the third quarter was 'broadly similar' to the strong second quarter," he said."The ONS believe that the underlying growth in the third quarter was 'broadly similar' to the strong second quarter," he said.
"This gives me confidence that although global economic conditions remain choppy, a steady recovery is underway.""This gives me confidence that although global economic conditions remain choppy, a steady recovery is underway."
However, the shadow chancellor Alan Johnson claimed the data showed no such thing.
"There's no sign yet of the kind of momentum in the private sector that we need to actually create the 2.5 million jobs that the [Office of Budget Responsibility] is suggesting are necessary, to actually come out of this with increases in employment," said Mr Johnson. However, shadow chancellor Alan Johnson claimed the data showed no such thing.
And 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. "There's no sign yet of the kind of momentum in the private sector that we need to actually create the 2.5 million jobs that the [Office of Budget Responsibility] is suggesting are necessary, to actually come out of this with increases in employment," he said.
But the government's planned cuts in its Spending Review got a stamp of approval from ratings agency Standard & Poor's, which raised its outlook for the UK's triple-A rating back to "stable" from "negative".
"In our opinion, the decisions reached by the United Kingdom coalition government in its 2010 Spending Review reduce risks to the government's implementation of its June 2010 fiscal consolidation programme," the company said in a statement.
Building momentum?Building momentum?
The construction sector continued to grow strongly at 4%, the data release from the ONS showed, although this was slower than the 9.5% recorded in the previous three months.The construction sector continued to grow strongly at 4%, the data release from the ONS showed, although this was slower than the 9.5% recorded in the previous three months.
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.
The building industry has been dealing with a backlog of work that had been postponed from the beginning of the year due to bad weather.The building industry has been dealing with 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."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 underlying rate is obviously significantly less than these headline numbers would suggest."
The recovering construction industry contributed almost a third of the total GDP growth for the quarter.The recovering construction industry contributed almost a third of the total GDP growth for the quarter.
However, the latest data suggests that the recovery may be becoming slightly broader-based.However, the latest data suggests that the recovery may be becoming slightly broader-based.
Manufacturing slowed to 0.6% from 1.0% the previous quarter, but was still ahead of predictions.Manufacturing slowed to 0.6% from 1.0% the previous quarter, but was still ahead of predictions.
Service industries also held steady at 0.6% growth, with the transport, storage and communications sub-sector returning to growth.Service industries also held steady at 0.6% growth, with the transport, storage and communications sub-sector returning to growth.
The pound jumped following the news, which lowered expectations that the Bank of England will engage in further quantitative easing in the near future.The pound jumped following the news, which lowered expectations that the Bank of England will engage in further quantitative easing in the near future.
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.
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."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.
Slowdown fearsSlowdown fears
Some economists had feared the UK economy was stalling on the back of spending cut threats.Some economists had feared the UK economy was stalling on the back of spending cut threats.
Growth was so rapid between April and June that a slowdown was seen as almost inevitable. The 1.2% rise in economic output in that period was seen 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%.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.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.