UK Economy Picks Up Speed in Third Quarter, Growth Fastest Since 2010

Workers put up a sign on a newly constructed office and apartment building in the heart of London

Gross domestic product rose 0.8 percent, faster than 0.7 percent in the April – June period, Britain’s Office for National Statistics said on Friday.

The quarterly growth and the year-on-year rate of 1.5 percent were in line with forecasts by economists in a Reuters poll.

Britain’s economy has staged a surprising recovery since early 2013 when it avoided falling back into recession and since then has accelerated to out-pace most other advanced economies.

The turnaround has given a boost to Conservative Chancellor George Osborne who defied calls from the International Monetary Fund and the opposition Labour party to bring forward spending in order to get the economy off the ropes.

The growth between July and September meant the British economy expanded for three successive quarters for the first time since 2011.

Nonetheless, unlike almost all other developed economies, it remains 2.5 percent smaller than its peak before the financial crisis.

Friday’s figures are unlikely to sway the Bank of England which has suggested it will keep interest rates at their record low for three more years.

Bank of England Governor Mark Carney said on Thursday that Britain’s economic growth made it one of the strongest performers among advanced economies but that growth was coming from a low base.

Earnings have lagged inflation for the past three years, raising questions about the sustainability of the recovery and giving ammunition to Labour to attack the government in the run-up to a general election due in 2015.

Friday’s data showed Britain’s giant services sector, which accounts for nearly 80 percent of the economy, expanded by 0.7 percent from the second quarter and was now above its peak before the financial crisis hammered Britain.

Growth in services was driven by the private sector while government services lagged behind, a reflection of Osborne’s push to curb public spending.

Manufacturing grew 0.9 percent and construction, which has begun to recover after a sharp contraction caused by the crisis, expanded by 2.5 percent, the strongest in more than three years as house-building picked up, the ONS said.

Consumers, a key engine of Britain’s economy, are feeling increasingly upbeat, a separate survey showed on Friday.

A consumer confidence index, compiled by market researchers You Gov and the Centre for Economics and Business Research, this month hit its highest level since it was launched in April 2009.

The survey showed that expectations of higher house prices were driving the increase in confidence: homeowners expected their properties to be worth 2 percent more in 12 months time, almost double the expected gain in July’s survey.

Critics of the government’s economic policies say its attempts to revive the housing market will not help bring about the long-hoped for re-balancing of Britain’s economy towards more manufacturing and exports.

The ONS’s preliminary estimates of GDP are among the first released in the European Union, and are based partly on estimated data. On average, they are revised by 0.1 percentage points up or down by the time a second revision is published two months later, but bigger moves are not uncommon.



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