Data from the Office for National Statistics (ONS) suggests the rise in GDP was buoyed by temporary factors such as the reversal of the second quarter’s bank holidays and the ‘Olympic effect’.
Economists had expected the economy to return to growth during the quarter, but by just 0.6%. Today’s figures are an initial estimate and are subject to future revision as more data becomes available, however.
Howard Archer, chief UK and European economist at IHS Global Insight, commented: “Just as second-quarter GDP contraction of 0.4% quarter-on-quarter appreciably overstated the economy’s weakness, so does the third quarter expansion substantially overstate its strength.”
The country’s dominant service sector saw output increase by 1.3% between July and the end of September. Services dropped by 0.1% in the second quarter.
Output in the production was up 1.1%, following a contraction of 0.7% in the previous three-month period. Construction output fell by 2.5%, compared with the 3% contraction in quarter two.
Azad Zangana, European economist at Schroders, said: “The ONS’ preliminary estimate of Q3 GDP showed the economy grew by a huge 1%, ending the UK’s longest double-dip recession since the Second World War in sensational style.
“It is worth bearing in mind that there are some temporary factors that have artificially boosted the latest quarterly results that will drop out of the numbers. Whether the better than expected numbers continue into the fourth quarter is difficult to judge.”
Some recent economic indicators suggest the UK started the fourth quarter with some weakness. The CBI Industrial Trends Survey showed manufacturers were hit by falling domestic and overseas demand in the three months to October.
Andy Brown, investment director at Prudential’s Portfolio Management Group, added: "Investor sentiment reacts to good news like this much more slowly than it does to bad news, such as economic signs of a downturn.
“We’re in a trendless but volatile period so celebration at this point may be an overreaction."
