LONDON (dpa-AFX) - Underpinned by a surge in services output, the U.K. economy expanded at the fastest pace in five years during the three months to September, ending three straight quarters of contraction, preliminary data from the Office for National Statistics showed Thursday.
Officially exiting from a double-dip recession, the economy grew by a bigger-than expected 1 percent sequentially in the third quarter.
It followed a 0.4 percent fall in the second quarter and 0.3 percent drop in the first three months of the year. Gross domestic product was forecast to rise 0.6 percent in the third quarter.
The economy gained temporary boost from events like Olympic games and Queen's Diamond Jubilee. The bounce back thus seems to be less rosy and fades future prospects.
The production side breakdown showed recovery in the services sector on Olympics ticket sales, while the rate of decline in construction slowed from a quarter ago.
Output of the production industries advanced 1.1 percent, reversing a 0.7 percent drop in the previous quarter. Likewise, service output grew 1.3 percent, following a 0.1 percent fall.
At the same time, construction output fell at a slower pace of 2.5 percent after easing 3 percent in the previous quarter.
On an annual basis, the economy remained flat in the third quarter, in contrast to a 0.5 percent fall forecast by economists.
Reacting to the latest GDP figures, Chancellor of the Exchequer George Osborne said the U.K. economy is healing, but reminded that the economy faces many challenges from euro area.
There is still a long way to go, but these figures show we are on the right track,' he said. 'This another sign that the economy is healing and we have the right approach.'
The Ernst & Young ITEM Club forecasts 0.2 percent decline in GDP this year, before 1.2 percent growth in 2013. The British Chambers of Commerce projected a more weaker 0.4 percent fall in 2012.
Bank of England Governor Mervyn King recently said the central bank is ready to add more stimulus if the recent positive signs in the economy fade.
With recovery currently looking limited and far from guaranteed, IHS Global Insight's Chief U.K. Economist Howard Archer believes that the bank will ultimately decide to give the economy a further helping hand - be it in November or delayed until early-2013.
Today, Director General of BCC John Longworth said GDP data will give many businesses the confidence to invest. But the government still has work to do to ensure than an economic recovery is sustainable.
CBI Director-General John Cridland said he expects conditions to remain positive going into the fourth quarter, reflecting some easing of the pressure on household budgets from lower inflation.
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