The UK economy officially came out of its double-dip recession today as the first estimate of economic activity from the Office for National Statistics (ONS) predicts that the economy grew by one per cent in the third quarter of 2012.
The first estimate only includes data from the output side of the economy. However, most analysts expect the expenditure side of the economy to contribute positively to the overall figures when they are included in the second estimate next month.
Consumer spending is likely to have helped as retail sales volumes rose by one per cent quarter-on-quarter and data already released shows strong growth in the dominant services sector.
This quarter’s rise in GDP is the first time since the third quarter in 2007, five years ago, that the UK economy has posted a full one per cent quarterly rise. However, the ONS says that although it cannot clearly quantify the impact of one-off events, it thinks that accounting for Olympic ticket sales in the quarter boosted the figures by 0.2 per cent.
It also said previously that the loss of output due to the extra bank holiday as a result of the Queen’s Diamond Jubilee impacted the economy by 0.5 per cent, but this would have been recovered in the third quarter. This effectively means that underlying growth in the third quarter was 0.3 per cent.
Howard Archer, Chief UK & European Economist at IHS Global Insight said: “On balance, it appears that the economy is currently seeing modest underlying growth after stripping out all of the distorting factors that impacted on GDP in the second and third quarters (Golden Jubilees, very wet weather, and the Olympics and Paralympics).”
The figures were helped by positive contributions from the manufacturing and services sector but the construction sector again lowered growth figures.
The ONS said that production industries output increased by 1.1 per cent in the quarter, recovering from a 0.7 per cent contraction in the previous quarter.
The services sector, vital, because it makes up around two-thirds of the overall economy, grew by 1.3 per cent after suffering a 0.1 per cent contraction in the previous quarter.
However, the construction sector suffered another contraction. Activity shrunk by 2.5 per cent, following a three per cent contraction in the second quarter.
Mr Archer said: “Third quarter GDP was led by robust expansion in the dominant services sector, while there was also a very decent rebound in industrial production.
Disappointingly though, the construction sector continued to contract appreciably.”