The UK economy grew by 0.8 per cent in the third quarter of the year, twice as fast as economists had forecast but a slowdown from its rapid pace in the second quarter.
The stronger than expected figures suggest that the economy is expanding at a quicker pace than its long run average which should be enough to maintain growth in jobs in the private sector but whether it will be sufficient to offset public sector job losses is debatable.
Growth was particularly strong in the construction sector, which expanded by 4 per cent, and in transport and government services, while manufacturing slackened to growth of 1 per cent from 1.6 per cent.
The data are the first estimate of GDP growth in the quarter, which is often revised in subsequent estimates.
The Office for National Statistics said that, taking into account the poor weather that hit the UK earlier in the year – which deferred some activity into the second quarter and artificially boosted growth in that period – growth in the second and the third quarters were broadly similar.
Quarterly growth so far this year has been much stronger than estimated by the Office for Budget Responsibility as well as most City economists, seemingly shrugging off the fiscal tightening which Labour began earlier this year with the rise in VAT and introduction of 50 per cent top rate of tax.
The OBR had expected growth of 0.6 per cent in the second and third quarters.
The fear is that as spending cuts begin to bite deeper next year and many European trading partners also carry out cuts, the pace of growth cannot continue and exports will stall.
However, the figures so far this year will be a boost to the government, providing support for the view that the economy will be able to withstand cuts.
Importantly the data also make it look less likely that the Bank of England will intervene next month to pump more cash into the economy through its quantitative easing programme, despite recent signs that some members of its monetary committee are growing more sympathetic to increasing the stimulus to the UK economy.
Overall good news for us all.
Author: Chris Slay
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