Britain surprises with stronger growth

22nd December 2011, Comments 0 comments

Britain's economy showed unexpectedly strong growth of 0.6 percent in the third quarter, official data revealed on Thursday but the country still faces possible recession in the new year.

The Office for National Statistics (ONS) revised higher its estimate for gross domestic product (GDP) growth between July and September compared with the second quarter.

Analysts had expected no change to the earlier forecast putting British gross domestic product growth at 0.5 percent in the third quarter.

The ONS added in a statement that British GDP grew by 0.5 percent in the third quarter compared with ouput in the equivalent period in 2010, unrevised from its earlier estimate in November.

It also noted that second quarter GDP was in fact flat after previously stating that it had expanded by 0.1 percent.

"GDP growth in recent quarters continues to point towards a rather fragile economic picture" for Britain, the ONS said in its statement.

"During the nine quarters of the recovery (since recession), the economy has gained just over half of the output lost during the five quarters of contraction."

Vicky Redwood, chief UK economist at Capital Economics research group added: "We already have plenty of evidence to suggest that the economy has stalled or even contracted a bit in the fourth quarter."

A recession refers to two successive quarters of negative growth.

The ONS meanwhile noted on Thursday that the services sector continued to support weak GDP growth in Britain, expanding by 0.5 percent in the third quarter.

"However, this growth has been concentrated in just a few sub-sectors, primarily scientific administration and support, finance and insurance activities, education and health.

"Growth in a number of sectors that are orientated towards the household sector, such as wholesale and retail, real estate and other services, are relatively weak by comparison," it added.

The British government last month slashed its growth outlook, blaming the impact of the eurozone debt crisis, while Britain is struggling to recover amid high unemployment and inflation and despite record-low interest rates.

Finance minister George Osborne has insisted however that there will be no let-up in the coalition's plans to axe Britain's huge deficit and steer clear of the global debt storm.

Britain's economy is set to grow by just 0.7 percent next year, about a quarter of the previous official government forecast of 2.5 percent given in March.

In a busy week for key British data, the ONS said on Wednesday that the government's borrowing fell by more than expected last month. That came a day after Moody's stressed that the government needed to "stay on track" with its deep public spending cuts or risk a downgrade to Britain's AAA credit rating.

In its annual update to the markets on Britain's credit outlook, the US ratings agency highlighted the ongoing eurozone crisis and rising public debt as potential triggers for a downgrade.

Britain's Conservative-Liberal Democrat coalition government has sought to slash spending since coming to power last year when it inherited a record public deficit from the ousted Labour administration.

Britain is not a member of the eurozone but is a key trading partner of the single-currency area and it is bound by the EU limits on public deficits and debt.

© 2011 AFP

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