The UKs GDP for the third quarter impressed City analysts yesterday as figures showed the economy grew twice as fast as expected. Growth was 0.8 per cent in the third quarter, slower than the record 1.2 per cent expansion in the previous period but double the 0.4 per cent that economists had predicted.
The economy has rebounded this year in spite of some fiscal tightening, but sharper cuts next year will hit the economy just as the cyclical bounce back from recession may be running out of juice. George Osborne, chancellor, said "although global economic conditions remain choppy, a steady recovery is under way". His team at the Treasury are sure that confidence is strong and the economy can sustain fiscal tightening.
The broad-based growth, with services, manufacturing and construction all expanding in the quarter offers support that the economy is improving. Growth was particularly strong in the construction sector, which expanded by 4 per cent (though down from a record 9.5 per cent rate in the second quarter), and in transport and government services. Manufacturing growth slackened to 1 per cent from 1.6 per cent.
"This is the second major GDP growth surprise in a row and suggests that the UK economy is more resilient than many had feared," said James Knightley, economist at ING Bank.
