In yet another sign of the uncertainty of the world’s economic recovery, Britain's economy expanded at its fastest pace since 2010 in the third quarter, as growth returned to pre-recession levels. This is contrast to the slowdown in parts of the Eurozone. But good news it just that, good news. Once again the recovery remains weak, uneven and fragile. Certainly uneven and fragile are evident in the latest data from the UK's Office of National Statistics.
Economic output in the UK rose by 0.79% in the July through September quarter. This builds on a 0.7% rise in GDP recorded in the second quarter of 2013 and is the best quarterly performance since the second quarter 2010.
The Office for National Statistics said there had been a fairly strong performance across all sectors. Indeed, output increased in all four main industrial groupings within the economy in Q3 2013 compared with Q2 2013. Output increased by 1.4% in agriculture, 0.5% in production, 2.5% in construction, and 0.7% in services. Output from the services sector, which represents three-quarters of economic output, grew by 0.57%. Output from services is now above its pre-crisis peak in the first quarter of 2008.
The data also showed that the increase in construction output in the third quarter was driven by new work on private housing and commercial projects. This is another sign that Government's subsidised ‘Help to Buy’ mortgage scheme is driving the construction of new homes.
According to the ONS, production grew by 0.5%, although this remains 12.8% off its 2008 level, while within this, manufacturing improved 0.9% in the third quarter.
The annualised rate of growth over the six months to September was 3%, the ONS said, higher than the pre-crisis trend of around 2.2pc. The third quarter performance was the first time Britain recorded two consecutive quarters of above-trend growth since 2007.
On an annual basis, GDP rose by 1.5pc, according to the ONS. The data were particularly strong given it followed last year's robust economic performance owed the Olympics and Paralympics.
But overall economic activity is still not back where it was before the recession. The important services sector is higher than the previous peak, but manufacturing and construction are well below their peaks. As such, further evidence is needed before this can be judged a truly balanced recovery.
There are still big challenges on the supply side, not the demand side. Supply side constraints indicates that the current growth surge is unlikely to extend beyond next year.
Accordingly, there is a need to remain cautious. After all, the Eurozone experienced a similar recovery which now appears to be fading.
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