Cool response to third quarter UK growth data

Economists are playing down the strongest UK growth figures in five years as GDP increased by 1 per cent in the third quarter of 2012 to propel the country out of double-dip recession.

In its first estimate Office for National Statistics data published last week showed the UK ended three quarters of negative output, including a 0.5 per cent fall in the second quarter.

Business services and finance accounted for a third of all growth, increasing by 1 per cent compared with a flat second quarter while the total service industries grew by 1.3 per cent after a 0.2 per cent fall in the second quarter.

The only black mark was a 2.5 per cent fall in construction output after falls of 3 per cent and 5.9 per cent in the last two quarters.

Prudential Portfolio Management Group investment director Andy Brown says: “Investor sentiment reacts to good news like this much more slowly than it does to bad news, such as economic signs of a downturn. We are in a trendless but volatile period so celebration at this point may be an overreaction.”

JP Morgan Asset Management global strategist Tom Elliott says “The qualifications include the flattering comparison against a Q2 that included the Queen’s diamond jubilee holiday, which depressed spending, and the inclusion in the Q3 numbers of large one-off contributions from TV Olympic broadcasting rights and Olympic ticket sales.”

Chancellor George Osborne has urged caution, saying there is still a “long way to go” but the Government is on the “right track”.

He said: “By continuing to take the tough decisions needed to deal with our debts and equip our economy for the global race we’re in, this Government is laying the foundations for lasting prosperity.”