Politicians and economists react to news that the UK eocnomy grew 1% in the third quarter, ending the double-dip recession
Ed Balls MP, Labour's shadow chancellor
It's good news that, with the help of the Olympics, Britain is finally out of the longest double-dip recession since the second world war. Our economy desperately needs an injection of confidence. But this is no time for complacency and wishful thinking. Today's figures show that underlying growth remains weak and that our economy is only just back to the same size as a year ago — twelve months of damaging flatlining which has seen borrowing rise in the first half of this year. And with living standards falling, more tax rises on the way, small business lending down and the eurozone still in crisis, it would be very unwise of David Cameron and George Osborne to just sit back, cross their fingers and hope for the best. The complacent thing to do now is simply to wait and hope things will get better. The cautious thing to do is to act now to secure and strengthen growth in our economy.
Graeme Leach, chief economist at the Institute of Directors
The bounceback in GDP growth is good news but not enough to pop the champagne corks. More than half of the quarterly increase is attributable to the Olympics and the reversal of the jubilee effect in Q2. The key message is that we're out of recession but uncertain where we're going. Not for the first time we need to heed the warning that you can't see the road ahead through the rear view mirror. Our view is that growth will continue in Q4 but we have to recognise there could be a fallback.
John Walker, national chairman, Federation of Small Businesses
We welcome the news that GDP grew by 1% in the third quarter. The economy is going in the right direction, but there is still a long way to go. Growth has flatlined in the last year, so the chancellor must use the autumn statement to sustain recovery. Small firms want to grow and if this is to happen they need confidence in the economy. The government is moving in the right direction by announcing the small business bank, but we believe that also extending the national insurance contributions holiday to all micro-firms across the UK would add £1.3bn to GDP, helping to entrench growth.
James Knightley, analyst at ING Bank
We are hopeful that positive GDP growth will continue in coming quarters, although a repeat of today's 1% growth rate is highly unlikely anytime soon. The drag from negative real household disposable income is fading given the sharp drop in inflation and the fact that employment and wages are rising. The Bank of England's funding for lending scheme should also boost lending capacity while lowering borrowing costs for households and small businesses. Meanwhile, fears of another round of austerity measures are also receding. Bank of England governor Mervyn King has suggested he is comfortable with some fiscal slippage as long as it is down to external weakness rather than domestic profligacy.
However, external risks remain. The eurozone recession and sovereign debt worries plus concerns over the US fiscal cliff are likely to act as a drag on sentiment and exports. The recent run up in sterling is also a concern as it hurts competitiveness. This suggests to us more QE is likely in November to try and give the UK a bit more of a push.
Matthew Sinclair, chief executive of the TaxPayers' Alliance
Stronger economic growth than most forecasters expected over the summer is extremely welcome news.
One quarter of growth doesn't change the overall picture of a weak and vulnerable recovery. The first estimate for each quarter's growth should always be taken with a pinch of salt, but the new figures suggest that all those people working hard at companies struggling out of the recession are starting to get results.
If the government wants more of this kind of good news then they need to reform our dysfunctional tax system and create the right incentives for people to work, save and invest in Britain.
Chris Williamson, chief economist at financial data provider Markit
The UK economy grew 1.0% in the third quarter, rebounding from a 0.4% decline in the second quarter and enjoying the strongest quarterly expansion for five years. The second quarter had seen a lost working day arising from the extra public holiday for the Queen's diamond jubilee, so a bounce back was to be expected. If we make an allowance for the drop in output caused by the extra June holiday, the underlying trend in the economy is one of modest expansion over the past two quarters, with an acceleration in the third quarter due to a large extent to the Olympics.
Business survey data suggest that the economy's underlying quarterly growth trend over the past two quarters has been more like 0.1-0.3%.
Despite the third quarter improvement, the UK has grown by a mere 0.3% so far this year, with output unchanged in the third quarter compared to a year ago, according to the Office for National Statistics.
The government will most likely make the most out of this good news, but unfortunately it is unlikely that the UK will see such a strong performance again for some time. In reality, the danger is that this figure fuels a misguided belief that the economy is on the mend, when in fact there is plenty of evidence to suggest that momentum is being lost again.
John Cridland, CBI director general
It's really encouraging news that growth has snapped back so strongly in the third quarter. Although the Olympics and jubilee have made up the majority of that growth, these numbers do also seem to point to some acceleration in underlying momentum.
We expect conditions to remain positive going into the fourth quarter, reflecting some easing of the pressure on household budgets from lower inflation. But the global economic environment remains challenging.
Glenn Uniacke, senior dealer at Moneycorp
The markets had expected strong growth. What they got was the impression that a blue touch paper had been lit.
For the economy to have lurched skyward after such a prolonged slump appears an impressive turnaround … but scratch a little deeper and the performance looks a little less scintillating.
Much of the boost is due to one-off factors like the Olympics, and the natural rebound effect that follows a quarter in which working days are lost.
So strip out the exceptional factors and the figure is less breathtaking — closer to zero. And after a pitiful start to the year, the annual trend is likely to be largely flat.
With the promised supply side reforms yet to materialise, there's every chance that Q4 will disappoint compared to Q3's surge.
Howard Archer, IHS Global Insight
The economy is far from out of the woods with further relapses highly possible in the face of still tough domestic and global (especially eurozone) conditions. So it is premature for the chancellor to contemplate singing in his bathtub (or on the train).
Meanwhile, it is now looking an extremely close call as to whether the Bank of England opts for more quantitative easing in November. Much could well depend on survey evidence on how the economy started off the fourth quarter.
GDP growth coming in stronger than expected in the third quarter lowers the odds that the Bank of England will hold fire on more QE in November.
Nevertheless, with recovery currently looking limited and far from guaranteed, we believe that the Bank of England will ultimately decide to give the economy a further helping hand – be it in November or delayed until early 2013. However, we acknowledge that the Bank of England could now be done on QE with seemingly split opinions within the MPC as to whether more QE is needed and a growing view within the committee that QE may now be becoming less effective.
Jason Conibear, trading director at Cambridge Mercantile
What have we learnt today? More than anything, perhaps, that the prime minister is no good at keeping secrets. We've emerged from the double dip but nobody is denying that we've had the wind behind us. It's hard to quantify but the real figure, minus the Olympic boost and other one-off factors, is likely to be roughly half this.
We're back in the black and it's better than many had anticipated.
This better than expected data comes on the back of a number of positives in recent weeks, not least falling inflation, unemployment and stronger retail sales, but major question marks remain over the UK economy. The UK economy is fundamentally tied to the eurozone, our biggest export market, and that keeps the domestic economic recovery on a knife edge. With the global economy as finely balanced as it is, there's every chance we could see more contraction during 2013.
Ian Kernohan, economist at Royal London Asset Management
No doubt this bounce will be passed off mainly as an Olympic boost, though a much larger influence is the volatility caused by the diamond jubilee holiday in June.
Unless we have an unusual weather event, there should be no special factors in Q4, so we will get a better idea of the underlying growth picture when the next set of GDP data is published in January.
The MPC appears to have been stepping back from a QE extension, so it would take much weaker news on the economy for them to make a policy move next month.
Andrew Sissons, researcher at the Work Foundation
The economy remains smaller today than it did this time a year ago, and that should be a serious cause for concern. While this quarter's growth corrects for the shallow double-dip recession, it should not be taken as a sign that a strong recovery is on the way.
The most encouraging news here is the improvement in the production industries, particularly manufacturing. British manufacturing has had a turbulent year, but its growth is vital to a healthy and balanced recovery. Government must keep working to unlock business investment, to remove barriers to growth for the firms with the most potential, and to support innovation and entrepreneurship. Meaningful action on these priorities should be central to the chancellor's autumn statement in December.
Jeremy Cook, chief economist at World First
Falls in construction output are a real concern, inflationary pressures will weigh on the consumer expenditure portion while eurozone issues will keep international trade and sentiment. Enjoy the positivity while it lasts, I'm afraid we are not out of the woods yet.
Steve Box, UK head of trade and receivables finance at HSBC
Our Growing British Business report shows that the majority of UK businesses are confident of growth over the next two years, demonstrating the tenacity and determination with which business leaders are rolling up their sleeves and driving growth. Ultimately, the approach of these inspirational business leaders will have a positive knock-on effect for UK PLC as a whole.
The rise in employment rates also reflects our report in that business leaders are planning to invest in staff over the next two years in order to grow their business.
Terry Scuoler, chief executive of manufacturers' organisation EEF
Output across manufacturing and the wider economy has mounted a strong rebound confirming that activity wasn't lost, just displaced from the previous quarter. This has to be regarded as a positive development, given the disappointing data in the year so far.
However, a true account of the UK's economic performance has been skewed recently due to a series of one-off events, and this quarter is no different. The question is whether this first estimate is enough to signal an improvement in the underlying growth picture. With survey data, particularly in our major markets, pointing to difficult trading conditions in recent months, it's unlikely this pace of expansion will be maintained into the new year.