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Britain exits recession

Source : BUSINESS_STANDARD
Last Updated: Thu, Oct 25, 2012 20:40 hrs

After falls in unemployment and inflation last week, ministers will seize on the latest GDP figures as evidence their economic plans are on track

Britain left recession in the third quarter after posting its strongest quarterly GDP growth in five years, official data showed on Thursday, although temporary effects may have masked a weaker underlying picture.

The Office for National Statistics said Britain's gross domestic product rose by 1.0 per cent between July and September after shrinking by 0.4 per cent between April and June. On the year, the economy was flat.

Economists polled by Reuters had forecast a 0.6 per cent quarterly rise in third quarter GDP and a 0.5 per cent fall on the year.

The return to growth after three consecutive quarters of contraction is welcome news for a coalition government under pressure to do more to revive the economy and shaken last week by the resignation of a senior minister.

However, the third quarter reading was boosted by ticket sales for the London Olympics and a rebound from the previous three months when an extra public holiday dented output.

Bank of England Governor Mervyn King cautioned on Tuesday that the recovery would remain slow, with threats posed by the Euro zone debt crisis and a cooling of the fast-growing economies of India, China and Brazil.

Nevertheless, investors scaled back expectations for another cash boost from the BoE as King said policymakers would think "long and hard" before extending the currently approved £375 billion of quantitative easing bond purchases.

The ONS said the British economy had grown by 0.3 per cent so far this year.

After falls in unemployment and inflation last week, ministers will seize on the latest GDP figures as evidence their economic plans are on track.

The opposition Labour Party has accused the coalition of holding back the recovery by sticking too tightly to its austerity plans to eliminate the budget deficit.

Britain has not fully recovered the output lost during the 2008-2009 slump that has left many Britons worse off and the economy slipped back into recession at the end of last year.

Output in Britain's service sector — which makes up more than three quarters of GDP — rose by 1.3 per cent in the third quarter after falling 0.1 per cent in the second quarter. That was the strongest quarterly growth since the third quarter of 2007.

Industrial output was 1.1 per cent higher, the strongest rise since the second quarter of 2010. Construction — which accounts for less than 7 per cent of GDP — contracted by 2.5 per cent.



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