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.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”.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.“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.”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.”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.”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”.
“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.Later on Tuesday, the CBI published a letter it has sent to Mr Osborne and Business Secretary Vince Cable ahead of the publication of the government’s growth white paper.In it, the business group calls for a “vibrant” small-and-medium sized businesses sector, and help with exports to growing economic regions of the world.In addition, it wants to see “reduced uncertainty” around domestic projects in sectors such as energy, and a reform of public service delivery, with barriers to outsourcing of services removed.
CBI director-general Richard Lambert said there was a need “for a policy focus on those measures that can have the greatest impact on growth performance in a relatively short timeframe”.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.”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 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.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.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 rose one cent against the dollar, to $1.585, immediately following the data release – Bbc