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UK economic growth picks up to 0.5% UK economic growth picks up to 0.5%
(40 minutes later)
The UK economy grew by 0.5% in the third quarter of 2011, according to the Office for National Statistics (ONS).The UK economy grew by 0.5% in the third quarter of 2011, according to the Office for National Statistics (ONS).
The growth in the July-to-September period compared with a 0.1% expansion in gross domestic product (GDP) in the previous quarter.The growth in the July-to-September period compared with a 0.1% expansion in gross domestic product (GDP) in the previous quarter.
Output of the production sector rose 0.5% in the third quarter, compared with a 1.2% fall previously.Output of the production sector rose 0.5% in the third quarter, compared with a 1.2% fall previously.
Service sector growth was up 0.7%, against a rise of 0.2% in the previous quarter.Service sector growth was up 0.7%, against a rise of 0.2% in the previous quarter.
The ONS emphasised that growth in the second quarter of the year had been dampened by one-off factors such as the extra bank holiday for the royal wedding.The ONS emphasised that growth in the second quarter of the year had been dampened by one-off factors such as the extra bank holiday for the royal wedding.
As a result of these factors, analysts said the third quarter figures should not be interpreted as a big economic rebound. As a result of these factors, analysts said the third-quarter figures should not be interpreted as a big economic rebound.
James Knightley, at ING Financial Markets, said: "While the Q3 growth rate looks respectable it is important to remember that this follows a Q2 figure depressed by having fewer working days because of the royal wedding and supply disruptions caused by the Japan earthquake/tsunami. James Knightley, at ING Financial Markets, said: "While the Q3 growth rate looks respectable, it is important to remember that this follows a Q2 figure depressed by having fewer working days because of the royal wedding and supply disruptions caused by the Japan earthquake/tsunami.
"Indeed the ONS earlier stated that these factors may have knocked up to 0.5% points off Q2 growth. Consequently, we should have seen a big rebound in any case. href="/news/special/business/11/economy_jargon/css/main.css?cachebuster=cb00000001" rel="stylesheet" type="text/css" /> Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
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"So, for the economy to have only grown 0.5% in Q3 suggests the underlying picture remains weak," Mr Knightley said."So, for the economy to have only grown 0.5% in Q3 suggests the underlying picture remains weak," Mr Knightley said.
Amit Kara, analyst at UBS, added: "GDP was in line with our forecasts but it should be seen as a backwards looking indicator. The bounceback is due to a relatively weak holiday affected second quarter." Howard Archer, economist at IHS Global Insight, added: "This performance overstates the underlying strength of the economy and this is likely to be as good as it gets for some time to come."
The ONS said the riots in August did not have a noticeable effect on the overall GDP figure. However, Chancellor of the Exchequer George Osborne described the figures as "a positive step" and better than many people had forecast.
GDP is the total amount of goods and services produced by the UK economy. "Of course the British economy has got this difficult journey. It is a journey made more difficult by the kinds of things you see for example today in the markets because of the situation in the eurozone.
"But we are determined to finish this journey," Mr Osborne said.
Asked whether the government would stick to its austerity plans, Mr Osborne said: "We have to understand that this journey is the only route that will take us to prosperity and recovery."
But concerns about the UK economy were not helped by latest Purchasing Managers' Index data, also released on Tuesday.
The index for manufacturing activity in October fell to 47.4 points, from 50.8 points in September. Any reading above 50 indicates expansion.
Victoria Cadman, economist at Investec, said the PMI data was "disappointing" and "implies that the manufacturing sector is contracting".
What is your reaction to these figures? How are you coping with the current economic climate? Send us your comments and experiences using the form below.What is your reaction to these figures? How are you coping with the current economic climate? Send us your comments and experiences using the form below.