Today's GDP figures - showing growth of 1.0 per cent in the third quarter - should give us all something to cheer. Certainly George Osborne will be relieved to witness the fastest pace of growth since he entered No. 11 Downing Street. But these latest figures, welcome though they are, do not yet show that we are marching towards the sunny uplands.

Given that GDP contracted in each of the last three quarters and has barely grown at all since George Osborne came to power, even growth of 1.0% in Q3 will mean that GDP is on course to have been flat in 2012. This is quite a contrast from the 0.8% growth predicted by the OBR as recently as March, never mind their 2.8% prediction in the June 2010 pre-budget forecast.

Given the OBR's poor track record in predicting growth there are five reasons to be cautious about whether the UK is now on an upward trajectory. First, today's figures include a bounce of at least 0.5% due to lost output from the Jubilee bank holiday and sales of Olympic tickets and TV rights all scoring in the third quarter.

Second, 80% of the spending cuts are still to come. As the IMF admitted earlier this month, austerity may have had a bigger impact on growth than previously predicted. If true, this is likely to further dampen domestic demand and, worse still, affect confidence by discouraging people from spending and businesses from investing.

Third, there is no sign that the squeeze in living standards is letting up. It is now well established that average household incomes have been flat since 2004. This is compounded by rising food, energy and transport costs. The severe drought in the US, wet British summer and Russian heatwave have all affected crop yields pushing up prices. Four of the 'Big Six' energy firms have announced increases in gas and electricity prices ranging from 6 to 9 per cent with the other two expected to follow. Meanwhile, there was outrage when it was announced in August that rail fares would rise over 6 per cent in January.

Fourth, the OBR are expecting investment to rebound from 0.7% this year to 6.4% next year (Table 1.1) in order to see growth of 1.3 per cent. This seemed surprising at the time but now looks extremely unlikely. Over the last year, investment has grown just 0.3% and the Government's policy framework is deterring major infrastructure projects in energy generation, rail and airport expansion.

Finally, the slowing pace of growth in the global economy will affect Britain's export markets. The eurozone is expected to contract this year and barely grow next. But things could get much worse if Spain's banks go belly up. Growth in the BRICs is also down, particularly in Brazil and India, which have become important new markets for the UK. In the last two years, exports to India increased by 78% and to Brazil by 45%.

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.

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