Kenneth Clarke, Chancellor of the Exchequer, said: "The growth figures confirm that there is now zip in the economy." Mr Clarke boasted that Britain would grow faster than France and Germany for the fourth year running.
Separate figures showed a marked drop in Britain's total trade deficit in August, thanks to only the fourth monthly surplus with the EU since the start of 1988. But trade with non-EU countries dived deeper into the red in September.
Gross domestic product, the widest measure of the economy, grew by 0.8 per cent during the July-September quarter, to a level 2.3 per cent higher than a year earlier. Services, which make up two-thirds of the economy, expanded at an even faster pace of 0.9 per cent, or 3.3 per cent year on year. Growth was fastest in financial and business services, followed by communications. Hotels and catering dipped following the Euro 96 boost in the second quarter.
Manufacturing output, which accounts for just under a quarter of the economy, expanded by about 0.5 per cent in the three months, its first increase since the middle of last year. This implies a bounce in manufacturing last month, for which the figures have not yet been published, after a small drop in August.
There was also a significant rise in construction output during the third quarter, according to the Office for National Statistics.
The increase was due to private commercial building and infrastructure. This suggests that the Private Finance Initiative is starting to boost growth, having slowed it in the first half of the year.
Agricultural output was extremely buoyant, too. Crop yields were much higher than last year due to the weather and to a reduction in the amount of land farmers have had to set aside under EU rules.
City analysts said that Eddie George, Governor of the Bank of England, was likely to see yesterday's figures as more evidence in favour of higher base rates, although the prospect of a cautious Budget next month would make him hold his fire at next Wednesday's monetary meeting. But most do not expect Mr Clarke to raise rates before the election.
The trade balance was in deficit by pounds 584m in August, less than half July's gap.Reuse content