Economic growth steady at 1% although rate is under pressure

UK GDP increased by 1% in volume terms during the second and third quarters, latest official figures have shown.

Data from the Office for National Statistics shows output from production industries grew by 0.9%, although this was revised down from the previous estimated increase of 1.1%.

Manufacturing output rose by 0.9% in the third quarter, again revised down from previous estimates of 1%. Nevertheless it is a marked improvement on the second quarter where output fell 0.8%.

The figures bear out the preliminary estimates put out by the ONS last month which confirmed the UK economy had emerged from recession after nine months, helped by the strong positive effect of the Olympic Games.

The Olympic effect was also borne out by the fact output in the service sector rose by 1.3% between the two quarters, a figure unrevised from previous estimates.

However, output in the construction industry fell by 2.6% during the period, worse than the 2.5% originally predicted.

One key indicator was household spending, which grew by 0.6% in volume terms – the best performance for more than two years.

The ONS will revise the growth figures for the third quarter again next month, when a more comprehensive set of data is expected to be available.

While encouraging, many analysts have warned the Olympic effect may be clouding the issue and growth may not be as strong as imagined with the economy effectively bumping along the bottom.

Commenting on the figures, Richard Halstead, Midlands region director at EEF, said: “While a number of one-off factors have been impacting on this year’s data and, the underlying trend is likely to be weak heading into the final months of this year, there is some encouraging news on sources of growth.  Both business investment and net trade made positive contributions to growth over the quarter – both key to economic rebalancing.
 
“That said, a mix of softening global prospects, heightened Eurozone uncertainty and financing challenges for smaller businesses means we cannot bank on these parts of the economy taking the reins in the short term.  Next week’s Autumn Statement must take steps to ensure that resources are prioritised to support companies looking to invest and export.”