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| UK economy grows a faster-than-expected 0.8% | UK economy grows a faster-than-expected 0.8% |
| (about 2 hours 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. |
| Meanwhile rating agency Standard and Poor's upgraded its outlook for the UK's triple-A credit rating. | 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". | 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. | 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 relief | 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. | "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, shadow chancellor Alan Johnson claimed the data showed no such thing. | However, 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," he said. | "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". | 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. | "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 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. | The City consensus was wrong on growth and too pessimistic. |
| Cynics might say no surprises there. | 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. | 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. | Manufacturing and services both kept up their momentum. |
| But that was then: in the period ending in September. | 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. | 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 fears | Slowdown 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. |
| "The timing of the VAT rise in the new year will help to bolster spending over the fourth quarter, but this is also likely to slow growth more noticeably through the winter and early next year," predicted Ian McCafferty, chief economic adviser to the CBI business group. | "The timing of the VAT rise in the new year will help to bolster spending over the fourth quarter, but this is also likely to slow growth more noticeably through the winter and early next year," predicted Ian McCafferty, chief economic adviser to the CBI business group. |
| Recent surveys have suggested that confidence in the manufacturing and services sectors has dropped due to concerns surrounding the impact of the spending cuts. | Recent surveys have suggested that confidence in the manufacturing and services sectors has dropped due to concerns surrounding the impact of the spending cuts. |
| Weaker-than-expected retail sales in September added to the concerns, with sales slipping 0.2%. | Weaker-than-expected retail sales in 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. |
Sector growth since 2008 |