UK economy returns to growth with help from Olympics

 
Graph: GDP growth, quarter on previous quarter since 2008

The UK economy emerged from recession in the three months from July to September, helped by the Olympic Games.

The economy grew by 1.0%, according to official gross domestic product figures (GDP), which measure the value of everything produced in the country.

The Office for National Statistics said that Olympic ticket sales had added 0.2 percentage points to the figures.

The figures are welcome news for business and ministers, said the BBC's economics editor Stephanie Flanders.

"The positive 'surprise' in these figures is largely to be found in the service sector, which is estimated to have grown by 1.3% in the third quarter, after shrinking by 0.1% in the three months before," she said.

The data also exceeded expectations from economists, who had predicted an increase of 0.6% in the quarter.

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It is growth - even with all the one-offs - and faster growth than most in the City expected”

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'Right track'

The economy had been in recession for the previous nine months and has still not recovered the levels of output seen before the financial crisis in 2008.

The ONS said that beyond the effect of ticket sales, it was hard to put an exact figure on the Olympic effect, although it cited increased hotel and restaurant activity in London as well as strength from employment agencies.

The GDP figures were also enhanced by comparison with the previous three months, because the second quarter had an extra public holiday as part of the Diamond Jubilee celebrations in June, as well as unusually bad weather, which reduced growth.

"There is still a long way to go, but these figures show we are on the right track," said Chancellor of the Exchequer George Osborne.

"Yesterday's weak data from the eurozone were a reminder that we still face many economic challenges at home and abroad."

Shadow chancellor Ed Balls praised the news but said that the figures "show that underlying growth remains weak".

"A one-off boost from the Olympics is welcome," he said. "But it is no substitute for a plan to secure and sustain the strong recovery that Britain desperately needs if we are to create jobs, get the deficit down and make people better off."

David Cameron: "We're on the right track"

The data is a preliminary estimate from the ONS, meaning that the third-quarter figures could be revised higher or lower.

"While the news is positive, the estimate must be put in context," said David Kern, chief economist at the British Chambers of Commerce.

"The 1% GDP figure for the third quarter 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."

The ONS said that the economy had contracted by 6.4% between the start of 2008 and the middle of 2009, and had since recovered about half of that lost output.

The level of output in the third quarter of 2012 was almost exactly the same as it had been in the third quarter of 2011.

 

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  • rate this
    +1

    Comment number 633.

    The is very good news and I wasn't expecting growth to be this strong. Although some of it is probably due to the Olympics, quarterly growth of 1% immediately after a recession along with falling inflation and unemployment shows that the government is getting things right. It's a shame Ed Balls is still as pessimistic as ever, and it shouldn't be long before Tory poll ratings start improving.

  • rate this
    +16

    Comment number 632.

    A little early to get excited about one months figures. Once the Olympics and the jubilee have been taken into account it`s closer to 0.3% while in the right direction still means the economy is stagnating. I`ve just read that Ford is closing two uk plants so lets be realists here, one swallow does not a summer make and those bragging will only have to eat humble pie come the next set of figures.

  • rate this
    +33

    Comment number 618.

    Let's not confuse an small increase in GDP, distorted by large corporations (several of whom pay little or no tax) and banks who have done remarkably well during the recession, with the real people in the economy who are losing jobs, seeing higher fuel and food prices.

    Recovery is when these people in the economy see an improvement in their circumstances - not the 5-10% of those at the top.

  • rate this
    +70

    Comment number 119.

    Look, please can we drop the partisan party political comments? this is good news and, along with everyone else, I am as nervous about our future as the next person. I hope with all my being that this is the beginning of the road back from the abyss but we need more than one quarter to consolidate this, so please, let us work together as a nation to rise above name calling

  • rate this
    +35

    Comment number 115.

    I suspect this piece of news owes a lot to the Olympics effect. In reality, there is very low confidence out there in business and communities. After 4 years, most of us remain shell-shocked by what happened in the banks. Nothing has changed other than higher taxation, less work and real despair. I predict that Q4 will be nearer to zero growth. It will take another decade to sort the mess out.

 

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