Growth eases UK slump fears
By Robert Barr |
October 27, 2010, Wednesday
|
Print Edition
Print Edition
BRITAIN'S economy grew by 0.8 percent in the third quarter, twice as fast as analysts had expected, according to official figures released yesterday which will calm fears of a double-dip recession.
The growth followed a rate of 1.2 percent - a nine-year high - in the second quarter, when restocking of inventories and construction surged. The combined expansion was the strongest back-to-back performance by the British economy in a decade, the Office for National Statistics said.
Prime Minister David Cameron's government got more good news as Standard & Poor's Ratings Services upgraded its outlook for British debt from "negative" to "stable" - indicating no threat of a downgrade - and reaffirmed the AAA rating on long-term debt.
Economic output is now 2.8 percent higher than in the third quarter of 2009, the last three months of a steep 18-month recession.
"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 economist James Knightley 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 stronger-than-expected growth will ease pressure on the Bank of England to expand its program of asset purchases, or quantitative easing, to stimulate the economy.
Output of the service industries grew by 0.6 percent, a rate matched by manufacturing and other production industries, while construction activity was up 0.4 percent in the third quarter.
"These numbers will clearly ease near-term concerns over a possible double dip in the UK economy and suggest that GDP growth this year will be a bit stronger than our previous forecast of 1.5 percent," said Jonathan Loynes, chief European economist at Capital Economics.
The government is counting on a surge in private sector activity to replace nearly half a million jobs which will be lost due to public-sector cuts.
The growth followed a rate of 1.2 percent - a nine-year high - in the second quarter, when restocking of inventories and construction surged. The combined expansion was the strongest back-to-back performance by the British economy in a decade, the Office for National Statistics said.
Prime Minister David Cameron's government got more good news as Standard & Poor's Ratings Services upgraded its outlook for British debt from "negative" to "stable" - indicating no threat of a downgrade - and reaffirmed the AAA rating on long-term debt.
Economic output is now 2.8 percent higher than in the third quarter of 2009, the last three months of a steep 18-month recession.
"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 economist James Knightley 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 stronger-than-expected growth will ease pressure on the Bank of England to expand its program of asset purchases, or quantitative easing, to stimulate the economy.
Output of the service industries grew by 0.6 percent, a rate matched by manufacturing and other production industries, while construction activity was up 0.4 percent in the third quarter.
"These numbers will clearly ease near-term concerns over a possible double dip in the UK economy and suggest that GDP growth this year will be a bit stronger than our previous forecast of 1.5 percent," said Jonathan Loynes, chief European economist at Capital Economics.
The government is counting on a surge in private sector activity to replace nearly half a million jobs which will be lost due to public-sector cuts.
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