UK recovery belies financial crisis
Third quarter growth figures for the UK, released this morning, show the economy powering ahead at 0.8%, double that of many forecasts. Combined with the 1.2% number for Q2, this could translate into a 3% growth-rate for 2010 as a whole.
The economy appears to be bucking the trend for post-financial crash recessions where recovery remains sluggish for years afterwards. Hopes of a sustained recovery are in the air.
The Chancellor, George Osborne said: “Today’s figures show the economy continuing to grow, at double the rate the market expected and the fastest rate for the third quarter since 1999. Just like the second quarter, the growth is broadly based and the lion’s share is coming from the private sector.
“The ONS believe that the underlying growth in the third quarter was broadly similar to the strong second quarter. This gives me confidence that although global economic conditions remain choppy, a steady recovery is underway.”
The Office for National Statistics (ONS) data showed that construction output helped drive growth in GDP, growing by 4% during Q3 and contributing 0.2% of the overall 0.8% expansion.
The pound rose strongly against the dollar and the euro as the numbers were announced.
ING economist James Knightley thought figures meant that a further round of quantitative easing (QE2) will now be delayed until early next year, if at all. “This is the second major GDP growth surprise in a row and suggests that the UK economy is more resilient than many had feared. The government will no doubt take this as a sign that the private sector can fill the gap created by public sector cuts, but with consumer confidence, hiring intentions surveys and housing activity data all softening, we remain cautious.”
Rookie shadow chancellor, Alan Johnson speaking to the BBC, dismissed the figures as inadequate, given the “cuts” to come.
Fraser Nelson, editor of The Spectator, pointed out on his Twitter page that the lag means Q3 is the result of Labour policy, while the S&P upgrade is a vindication of Osborne.