GDP: Economists sound warning despite better than expected growth

ECONOMISTS today warned that the UK still faces a bumpy ride on the road to recovery, despite better than expected growth figures for the third quarter of the year.

Gross Domestic Product (GDP) increased by 0.5% in the three months to the end of September, the Office for National Statistics revealed.

The figure is an improvement on the marginal 0.1% rise seen during the second quarter and compares with economists forecasts for the third quarter of 0.3% to 0.4%.

However, the rate of growth is still below the long-term average for the UK and the latest figure is thought to contain an element of “catch-up”, with the second quarter having been affected by one-off factors such as April’s unusually warm weather and the Royal Wedding, both of which are thought to have depressed retail sales.

With continuing uncertainty over the debt crisis within the European single currency zone, many economists believe it would be unwise to read too much in to the improvement seen during the third quarter.

Graeme Leach, chief economist at the Institute of Directors, said: “You can’t see the road ahead from the rear-view mirror.

“Today’s GDP figures are welcome news, but they fail to capture the dramatic events of recent weeks in the eurozone. GDP growth is almost certain to flatten off, or even fall, in the fourth quarter of this year due to postponed business investment and consumer caution, even if the eurozone crisis stabilises.

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“Unfortunately we don’t think the crisis is over; it will continue to haunt recovery prospects in the UK.”

And Jonathan Loynes, UK economist at Capital Economics, said: “The slightly better than expected GDP figures for the third quarter have not altered our view that the UK economy is likely to stagnate at best over the next year or so, with growing risks of another major recession.”