Tuesday, October 26, 2010

UK Economic Growth Rate Beats Expectations

The British economy grew by 0.8% in the three months to September - double the rate that had been predicted by analysts.

A surge in construction helped boost gross domestic product (GDP), with the sector growing by 4% during the third quarter.
The key services sector -which includes hotels, transport and financial services, and accounts for three quarters of the economy - expanded by 0.6%.
Overall industrial production also grew by 0.6%, despite a slowdown in farming and mining.
The latest GDP figure marks a fourth consecutive quarter of growth since the recession - but it is well down on the 1.2% rise between April and June.
However, the Office for National Statistics (ONS) points out that bad weather at the start of the year contributed to a bounce back in the second quarter.
If this seasonal factor is taken into account, the underlying growth between July and September was actually similar to that of the second quarter, it says.
Economic growth over the past six months has now hit 2%, which is the fastest pace of expansion seen over two consecutive quarters for 10 years.
The Chancellor George Osborne said this should underpin confidence in the 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 under way."
However, shadow chancellor Alan Johnson warned that people should "not get carried away" by the latest numbers as they still reveal that the rate of growth fell by 33%.
"I think what this shows is that there's still momentum coming from the measures that took the UK out of recession and back into growth," he told Sky News.
"We haven't yet seen the effects of £6bn taken out of the economy, which the Government announced in May, and we haven't seen the effects of the austerity measures announced in the Spending Review."
Speaking on Sky News after the GDP figure release, HSBC's head of global research, Bronwyn Curtis, said: "Can the economy take the cuts? We don't know.
"If we continue to see numbers like this, it looks as though we can.
"I suspect, though, that we will see that falling away in the fourth quarter and the first quarter of next year," she added, noting that forward-looking indicators such has house prices showed deterioration.
Some experts do however believe that businesses will gain momentum now the Government has laid out concrete plans to tackle the deficit in its Spending Review.
Albert Ellis, CEO of the recruitment consultancy Harvey Nash, told Sky News there would be an initial catch-up in figures before they level out.
He said: "For the next six or 12 months, we'll see further momentum.
"We're optimistic that we will see an absolute growth in the number of jobs."
The GDP figure comes after David Cameron promised business leaders he would ensure "relentless focus on growth" to help fill the hole left by the coalition's austerity measures, expected to cost 490,000 public sector jobs.
Critics doubt the private sector has the capacity Mr Cameron believes it does to take up the slack in the economy.

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