According to preliminary figures released by the Office for National Statistics, after a nine-month run of recession the UK economy rebounded from disappointing second quarter Gross Domestic Product figures and finally recorded a return to growth.
The extent of growth even exceeded economists’ expectations. The median forecast of over thirty economists involved in a survey for Bloomberg News Agency was for just 0.6 per cent growth and even the highest estimate of 0.8 per cent was significantly lower than the 1 per cent rise in GDP actually achieved.
Furthermore, although economists expected third quarter GDP to decline 0.5 per cent from the previous year it remained unchanged.
The main causes of this unexpectedly strong return to growth were ticket sales for the Olympics, which added 0.2 percentage points to the figures, and a services surge.
Services experienced a 1.3 per cent hike from the precious three months (the best recorded for five years) while production and manufacturing increased by 1.1 and 1 per cent respectively.
However, some are warning that it is too soon to celebrate and that this positive result could well be masking still existing economic weak spots.
Prior to the data release an economist with London based IHS Global Insight asserted: ‘Looking through the distortions, the likelihood is that the economy is eking out limited growth.’ Howard Archer continued: ‘With any recovery currently looking fragile, feeble and far from guaranteed, the UK is far from out of the economic woods.’
Indeed, construction output declined for a third consecutive quarter, dropping by 2.5 per cent.
Whilst this GDP news is positive in many respects it is by no means indicative of long-term UK economic stability. Today’s results are preliminary and therefore subject to change. Although the ONS is unlikely to negatively revise the figures it could happen once they have more information. Also, the UK has yet to regain the levels of output achieved before the onset of the financial crisis in 2008, and with mountainous job cuts and a potentially deep Eurozone recession on the horizon the UK economy returning to contraction in 2013 is a distinct possibility.
As of 10:30am
The Pound to Euro exchange rate is currently trading at 1.2383
The Pound to US Dollar exchange rate is currently trading at 1.6120
The Pound to Australian Dollar exchange rate is currently trading at 1.5513
The Euro to US Dollar exchange rate is currently trading at 1.3015
The Euro to Pound exchange rate is currently trading at 0.8071
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