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News : UK Economy Last Updated: Oct 28, 2013 - 4:24 PM


UK economy grew at fastest rate in more than 3 years in third quarter
By Finfacts Team
Oct 25, 2013 - 11:07 AM

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The UK economy grew at the fastest rate in more than three years during the third quarter, official data showed Friday, signalling that the recovery this year is accelerating.

In a preliminary estimate, the Office for National Statistics (ONS) said GDP (gross domestic product) expanded 0.8% between July and September compared with the second quarter, when it advanced 0.7%. The third quarter data is the best since the second quarter of 2010, when the economy grew 1.0%.

Economic output rose 1.5% compared with the third quarter of 2012.

The ONS said that the contribution an industry grouping makes to GDP quarterly growth is dependent on the change in that industry grouping and its weight within the output approach to measuring GDP. The current 2010 based weights are: services 77.8%; production 15.2%; construction 6.3%; and agriculture 0.7%.

The largest contribution to Q3 2013 GDP growth came from services; these industries increased by 0.7%, contributing 0.57 percentage points to the increase in GDP. This followed an increase of 0.6% in Q2 2013. In the latest quarter there was widespread growth, with increases in each of the four main services aggregates (distribution, hotels & restaurants; transport,  storage & communication; business services & finance; and government & other services). Output from services is now 0.6% above its previous peak in Q1 2008, prior to the economic downturn.

Construction output increased by 2.5% in Q3 2013 compared with Q2 2013, contributing 0.15 percentage points to the increase in GDP. New work on private housing and private commercial were key contributors to this increase, and there was also growth in private housing repair and maintenance. The published monthly data for July and August was also dominated by growth in private housing and, particularly in July 2013, private commercial work.

There was also an upward contribution (0.06 percentage points) from production; these industries rose by 0.5%, with manufacturing increasing by 0.9% for the second consecutive quarter. There was also an upward contribution from water & waste management, which rose by 3.8%. The main reason for this rise was an increase in water supply caused by warm and dry weather, particularly in July. Partially offsetting these rises was a decrease of 6.8% in energy supply, with falls in both electricity and gas supply. The fall in gas was partially caused by a dip demand for gas in the production of electricity over the quarter.

Jobs

In accordance with a forward-guidance policy announced last August, the Bank of England has committed to keep the benchmark rate at 0.5% at least until unemployment falls to 7%. It projected that to occur at the end of 2016.

However, strong job creation over the summer, which has cut the jobless rate to 7.7% from 7.8%, and the central bank is preparing to revise their forecasts for growth, unemployment and inflation.

John Cridland, director-general of the CBI, the main British business lobbying group, commented: “Business and consumer confidence will be boosted by confirmation that the recovery is on track.
 
"Although growth is broad based there’s still a lot more to do to make sure that the economy properly rebalances, so we want to see stronger contributions from net trade and business investment.
 
“We expect business investment to pick up as confidence continues to build and demand and credit conditions improve. On exports, we need the Government to get behind our ambitious firms to help them sell their products and services in fast-growing markets around the world.”

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