UK Growth Figures 'Edging Upwards'

UK Growth Figures 'Edging Upwards'

The UK's desperate struggle for growth will be highlighted as official figures are set to reveal the recovery barely gathered pace in the third quarter.

Gross domestic product is expected to have increased by 0.4% in the three months to the end of September, a slight improvement on the 0.1% growth in the previous quarter, when the Office for National Statistics reveals the figures.

However economists warn the UK's economy is still in the sick bay, adding that the third quarter figures will be flattering as the economy played catch-up from the previous quarter, which was hampered by a host of one-off events such as the extra bank holiday for the royal wedding.

The UK's dismal performance is expected to be put into the shade by figures last week showing the US grew 2.5% in the third quarter on an annualised basis.

The UK's economy has been flat-lining over the past year amid falling consumer spending as wages fail to keep up with inflation, creating the biggest squeeze on living standards since the 1920s. Plans to "rebalance" the economy by exporting more have been hindered by the eurozone debt crisis and the slowdown in global growth.

The low growth in the second quarter was partly the result of an extra bank holiday for the royal wedding, the warm spring, which caused households to turn off their heating early, and disruption to the supply chain after the Japanese tsunami.

The manufacturing sector has been in decline for much of the third quarter as demand from overseas stalled amid the eurozone debt crisis.

However this has been partly offset by the powerhouse services sector, which makes up some three-quarters of the economy, and has proved surprisingly resilient, boosted by demand from business.

Victoria Cadman, an economist at Investec, said: "Although not a surge in the recovery pace, a 0.4% out-turn would clearly be welcome given growth has effectively been at a standstill across the previous three quarters.

"Given the 'special factors' likely to aid the third quarter out-turn, coupled with the headwinds of slower euro area growth and the broader risks of the euro area crisis, we would warn against taking such an out-turn to imply the UK recovery is gaining pace. Rather, we expect the recovery to creep ahead slowly."

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