United Kingdom: Economy exits recession, posts largest expansion in five years
October 25, 2012
In the third quarter, GDP expanded a robust 1.0% over the previous quarter in seasonally adjusted terms, according to a preliminary estimate released by the Office for National Statistics (ONS) on 25 October. The figure marked the fastest pace of growth seen in five years and contrasted the revised 0.4% contraction witnessed in the second quarter (previously reported: -0.5% quarter-on-quarter). In addition, the strong reading beat market expectations, which had the economy rising 0.6%. The strong expansion seen in the third quarter reflects a confluence of factors. On the one hand, quarter-on-quarter growth benefited from a favourable base effect, as the additional public holiday from the Queen's Diamond Jubilee curbed output in the preceding quarter. On the other hand, the London Olympic Games affected economic activity in several ways, but in particular, the ONS estimates that ticket sales, which were allocated in Q3 2012 despite having been sold throughout the previous years, added 0.2 percentage points to Q3 GDP growth. That said, preliminary estimates are prone to significant revisions in the months ahead. A revised and more complete set of data will be released on 27 November. All sectors fared better compared to the previous quarter. In particular, growth in the services sector which accounts for around three quarters of total output swung from a 0.1% contraction in the second quarter to a 1.3% expansion in the third quarter, representing the highest print in five years. In addition, the industrial sector expanded 1.1% in Q3, which contrasted the 0.7% contraction seen in the second quarter. Construction, on the other hand, contracted 2.5% (Q2: -3.0% qoq). In annual terms, GDP growth was flat in the third quarter. The reading, nevertheless, represents an improvement over the 0.5% contraction seen in the second quarter.