Britain Puts an End to Double-Dip Recession
With today’s announcement of third-quarter GDP numbers, Britain has finally exited its double-dip recession and posted its strongest growth in five years.
**1% GDP Growth**
The Office of National Statistics (ONS) released third-quarter data today showing GDP increased by 1.0 percent in Q3 compared with Q2 2012.
Output of the production industries was estimated to have increased by 1.1 percent after decreasing by 0.7 percent between Q1 and Q2. The construction sector shrank 2.5 percent in Q3 following a decrease of 3.0 percent in Q2. The service industries grew by 1.3 percent after falling down by 0.1 percent in Q2.
In volume terms GDP was estimated to have been flat in Q3 2012 compared with Q3 2011. ONS also said that the British economy had grown by 0.3 percent so far this year.
The newly released macroeconomic data topped most analysts’ expectations of 0.6 percent quarterly rise in Q3 GDP and a 0.5 percent fall on the year.
“There is still a long way to go, but these figures show we are on the right track. This is another sign that the economy is healing and we have the right approach: we’ve cut the deficit by a quarter, over a million new jobs have been created in the private sector, inflation is down, and the economy is growing.” commented George Osborne, Chancellor of the Exchequer, on the growth figures.
!m(/uploads/story/639/thumbs/pic1_inline.png)The return to growth is good news for the coalition government, which has been under heavy pressure to do more to revitalize the economy and was shaken last week by the resignation of a senior minister.
“There is still much to do, but these #GDP figures show we are on the right track, and our economy is healing.” tweeted Prime Minister David Cameron minutes after the ONS released the data.
Alan Clarke at Scotiabank said the positive GDP growth is indeed encouraging but also hardly surprising. According to Mr Clarke about half a percentage was expected to be added from the bounceback from the bank holiday and additional 0.3 from the Olympics, so a growth of 1 percent quarter on quarter had been more or less a must.
James Knightley, ING, said he is hopeful that positive GDP growth will continue in coming quarters but a repeat of today’s 1 percent is highly unlikely. Mr Knightley opined that with employment and wages rising, the drag from negative real household disposable income is slowly fading. Fears of another round of austerity are also receding as Mervyn King, Bank of England Governor, suggested he is comfortable with some fiscal slippage as long as it is down to external weakness rather than domestic profligacy.
**Amit Kara, UBS analyst:**
“What’s also slightly concerning is the output loss on the construction sector this year. The construction sector has lost more than 11pc of output over the last three quarters and that should stabilise and with that we should see a moderate pick-up in GDP but looking forward we only expect a very modest GDP growth into 2013.”
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