Economic growth figure unchanged

Consumers spent more on housing, transport and recreation and culture between July and September, ending five quarters of declines
12 April 2012

Economic growth between July and September has been left unchanged in revised figures despite the strongest performance for household spending in over a year.

Gross domestic product grew at 0.5% in the third quarter, according to the second estimate from the Office for National Statistics (ONS), compared to 0.1% in the previous three months.

Household spending was flat in the third quarter, ending five quarters of declines, the ONS said, as consumers spent more on housing, transport and recreation and culture. But this was not enough to lift overall GDP as production growth was revised down from 0.5% to 0.4% and services output was cut from 0.7% to 0.6%.

Economists have warned the third quarter was flattered as the economy played catch-up from the previous three months.

The period was hit by the extra bank holiday for the royal wedding and the Japanese tsunami, with most indicators pointing towards flat growth in the three months between October and December.

The figures revealed Government spending was up 0.9% in the third quarter, which is unlikely to continue as Chancellor George Osborne's austerity measures kick in.

And Vicky Redwood, chief UK economist at Capital Economics, said that without a 0.7% rise in firms' inventories, the economy would have contracted in the quarter.

She said: "Looking ahead, the activity surveys suggest that the economy has already relapsed, with GDP on course to stagnate or even contract a bit in the fourth quarter. And against the backdrop of the escalating eurozone crisis and ongoing fiscal squeeze, we still expect the economy at best to stagnate next year."

A Treasury spokesman said the UK economy is "not immune to the turbulence in the eurozone and its impact on British businesses".

He said: "The Government is using all levers to protect the UK economy and make sure that it remains a relative safe haven in the sovereign debt storm."

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