Britain bounces back from double-dip recession, but experts urge caution over GDP figures
David Cameron and George Osborne were handed an economic boost today as figures showed that Britain had bounced strongly out of recession over the summer.
The best set of economic figures since Mr Cameron became Prime Minister showed the nation's output jumped by one per cent in the three months to the end of September - far faster than City economists had forecast.
They also showed the best quarterly growth since the Northern Rock disaster in 2007.
The PM, who hinted yesterday in the Commons of “good news” to come, said economy was on “the right track”.
He welcomed the robust return of recovery but played down hopes that Britain's long slump was at an end.
Economists warned today that if “one-off” factors such as the Olympics and the Jubilee were stripped out, underlying growth in GDP - the official measure of the size of the economy - was still slow.
Chief economist at foreign exchange company, World First, Jeremy Cook, said: “While this is undoubtedly a welcome surprise, upon breaking down the numbers we should not get caught up in a flurry of champagne corks and party poppers. Overall underlying true growth is only 0.3 per cent at the moment - very much in the 'bouncing along the bottom' region.”
The Office for National Statistics said hotel bookings, ticket sales and other Olympic related activity contributed to third quarter GDP.
The extra Diamond Jubilee bank holiday in June, which meant the loss of a day's production in the previous quarter, also flattered today's figure.
The ONS said “the underlying pattern is one of subdued economic expansion” and said GDP is no bigger than it was a year ago after nine months of “double dip” recession.
Speaking during a trip to a business in Wandsworth in south west London Mr Cameron said “There's still a long way to go but these figures show we are on right track with the right approach.”
Manufacturing and other productive sectors grew by 1.1 per cent but construction output slumped again, by 2.5 per cent, although this was smaller than in the two previous quarters.
The recovery was in the main driven by a 1.3 per cent surge in the dominant service sector.
Today's announcement completes a week of far more encouraging data with unemployment, inflation and the deficit all falling and retail sales rising.
Chancellor George Osborne said “By continuing to take the tough decisions needed to deal with our debts and equip our economy for the global race we're in, this Government is laying the foundations for lasting prosperity.”
But Shadow Chancellor Ed Balls said while the emergence from recession was “good news” it came after a year of “damaging flatlining.”
He added: “With living standards falling, more tax rises on the way, small business lending down and the eurozone still in crisis, it would be very unwise of David Cameron and George Osborne to just sit back, cross their fingers and hope for the best.
“The complacent thing to do now is simply to wait and hope things will get better. The cautious thing to do is to act now to secure and strengthen growth in our economy.”
Business leaders gave a cautious welcome to the surprise 1 per cent jump. David Kern, Chief Economist at the British Chambers of Commerce, said: “While the news is positive, the estimate must be put in context. The 1 per cent GDP figure for Q3 is affected by distortions in the second quarter due to the Jubilee and Olympic ticket sales.
“Compared to a year earlier, the figures show that the economy is stagnant, with growth for 2012 currently at 0.3%, three percent below the level seen at the beginning of 2008, when the recession started.”
TUC General Secretary Brendan Barber said: “The economy is barely any bigger than it was two years ago and we are still on course for the slowest recovery this century.
“Austerity has already set us back at least two years. It's time to change course so we can make up for lost time and secure the strong sustained growth we desperately need to create good quality jobs and ensure real wage rises for hard-pressed families.”
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