Osborne praises GDP growth figures

Mid Devon Star: Chancellor George Osborne was given a boost when official figures showed the UK economy grew at its fastest pace for three years in the third quarter Chancellor George Osborne was given a boost when official figures showed the UK economy grew at its fastest pace for three years in the third quarter

Chancellor George Osborne claimed Britain was "on the path to prosperity" as official figures showed the economy grew at its fastest pace in three years in the third quarter.

The 0.8% upturn in gross domestic product (GDP) was the best performance since the second quarter of 2010, including a 2.5% surge in the construction sector - which has been bolstered by Government initiatives such as Help to Buy.

It is also the first time in three years that growth has improved for three quarters in succession, figures from the Office for National Statistics showed.

However, the size of the economy remains 2.5% off the pre-recession peak of early 2008 and there were warnings that the pace of growth could start to tail off.

Economists fear a continued squeeze on wages and rising household energy bills threaten consumer purchasing power.

Bank of England governor Mark Carney yesterday warned that growth was weighted heavily towards the household sector while investment and exports were lagging behind.

But he acknowledged that the rate of growth was "towards the top end of the advanced economies".

One expert, Samuel Tombs of Capital Economics, said the third quarter performance looked likely to be the best of all the G7 countries.

For Mr Osborne, it was another boost at the end of a week when figures showed that stamp-duty revenues helped public borrowing come in £1 billion lower in September.

The Chancellor tweeted after today's growth figures were announced: "This shows that Britain's hard work is paying off & the country is on the path to prosperity."

Prime Minister David Cameron tweeted: "Today's encouraging #GDP growth figures are another sign we are turning a corner."

However, Business Secretary Vince Cable chose a cautious metaphor and insisted more still needed to be done to address lack of bank lending.

He said: "We've always said the road to recovery would be a marathon, not a sprint."

Shadow chancellor Ed Balls said: "For millions of people across the country still seeing prices rising faster than their wages this is no recovery at all."

The new figures showed the economy grew by 1.5% over the last year, an improvement on the year-to-year rise of 1.3% in the second quarter. The International Monetary Fund is predicting full-year growth of 1.4% for 2013.

Third quarter GDP growth of 0.8% builds on a 0.7% upturn in the previous period and a 0.4% figure at the start of the year.

The latest improvement included a strong contribution from construction, which has been bolstered by Government schemes such as Help to Buy - an initiative which recently saw its new mortgage guarantee phase launched.

There were increases in new work on private housing and private commercial building as well as domestic repairs and maintenance. However, the construction sector is still 12.5% behind its pre-crisis peak.

Production grew 0.5%, though this would have been better but for a significant fall in gas output and electricity demand that acted as a drag on GDP as a whole. Production was 12.8% off the 2008 peak.

Within the sector, manufacturing improved 0.9%. It remains 8.9% off its level of five years ago.

Meanwhile, the powerhouse services sector, which represents three-quarters of economic output, grew by 0.7% and has now climbed 0.4% above its pre-crisis peak.

Chris Williamson, chief economist at Markit, said: "Britain is booming again with the economy showing the most sustainable and robust-looking upturn since the financial crisis."

But Alan Clarke of Scotiabank said the figure was a "tad disappointing" - given survey data indicating growth nearer 1% - and "wasn't a home run".

Jeremy Cook, chief economist at foreign exchange company World First, warned the squeeze on real incomes meant growth continuing at such a pace would be unsustainable, predicting the 0.8% upturn would be a "high-water mark".

Howard Archer, of IHS Global Insight, predicted that growth would slip back to 0.6% for the fourth quarter amid the pressure on purchasing power.

John Allan, national chairman of the Federation of Small Businesses, said confidence was rising across UK regions but urged more help from the Chancellor to help firms invest and grow.

The Bank of England has admitted it has been surprised by the pace of growth and improvement in employment - the latter being a key indicator on when the policymakers will lift interest rates from their historic low of 0.5%.

But Mr Carney has indicated that its support for the economy, which also includes a £375 billion programme of quantitative easing, must remain in place for now.

He said: "The message to households is that the recovery has begun, is strengthening, but we are not going to withdraw monetary stimulus until it's really gained that traction."

Deputy Prime Minister Nick Clegg told Radio 2's Jeremy Vine he could understand why people did not feel like the economy was on the upturn.

He said: "For many people is doesn't feel like a recovery until they feel actually they have got more money in their pocket and they don't feel under so much pressure from the bills they have to pay every week and every month."

He added: "I totally understand that if you are listening to these figures what does 0.8% mean about the economy as a whole when you are faced with high petrol costs, heating costs, electricity bills, gas bills, you are worried about how to make ends meet from week to week, from month to month?

"But, of course, the truth is that if we don't carry on with what we have done as a coalition government, and this recovery wouldn't be under way if wasn't for the coalition government, and dare I say it, our, my, the Liberal Democrats' role in it, if we don't carry on with it, that's what affects people even more because our approach means mortgage payments are lower than they would be otherwise, more people in work..."

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