The UK has climbed out of its longest double-dip recession since the 1950s, after GDP figures for the last quarter showed a bigger than expected rise.
The Office for National Statistics (ONS) said the economy grew by 1% between July and September, after a decline of 0.4% decline in the previous quarter.
David Cameron said the figures were proof the government's plans were working.
"We still have a long way to go and there are still difficulties ahead, but I think these figures do show that we are on the right track, we have got the right approach," he said during a visit to a factory in south London.
"We can see that with unemployment falling, also with a quarter of the deficit paid down in the last two years. There is more to do but these figures are good progress."
George Osborne also said the figures showed the government 'was on the right track'
The London 2012 Olympics and Paralympic Games were likely to have impacted economic activity in the third quarter, the ONS said.
Olympic ticket sales alone increased GDP growth in the period by 0.2 percentage points, while the event is likely to have lifted a range of other services including employment agencies, creative arts, office administration, accommodation and food and beverages.
Chancellor George Osborne said Thursday's figures showed the government "was on the right track".
"There is still a long way to go but these figures show we're on the right track and are a sign the economy is healing," he said in a statement.
However Ed Balls, Labour's shadow chancellor, said Thursday's figures were "good news" but it was "no time for complacency and wishful thinking".
"Today's figures show that underlying growth remains weak and that our economy is only just back to the same size as a year ago - twelve months of damaging flatlining which has seen borrowing rise in the first half of this year.
“And with living standards falling, more tax rises on the way, small business lending down and the eurozone still in crisis, it would be very unwise of David Cameron and George Osborne to just sit back, cross their fingers and hope for the best.
“In the two years since the spending review our economy has grown by just 0.6 per cent, compared to the 4.6 per cent George Osborne said his plan would deliver and growth of 3.4 per cent in the USA and 3.3 per cent in Germany.
Analysts also warned there were still question marks over whether the UK economy is on an upwards trajectory.
Will Straw, Associate Director at the Institute for Public Policy Research, said a number of gloomy factors, including the bulk of spending cuts and the squeeze in living standards, are still to hit the British economy.
"Britain's recession is already the longest since records began. Even with today's positive figures, it will be 2014 before the UK economy returns to its previous peak. But don't bet against further bad news ahead," he wrote in a blog for The Huffington Post UK
The GDP figures could also come back to bite the government, after David Cameron sparked controversy by hinting a day early that the British economy had grown.
The UK Statistics Authority is looking into whether the prime minister broke the law by making the comments, as such information is not supposed to be released early.
During Prime Minister's Questions on Wednesday, Cameron sought to emphasise recent positive indicators on the economy and said: "I can tell you, the good news will keep coming."
The prime minister is one of a very small group of people who are given advance 24-hours notice of the market sensitive data.