By Maximilian Clarke

The UK’s GDP grew by 0.5% over the third quarter 2011, up from just 0.1% for Q2, the Office for National Statistics' preliminary estimate indicates.

The figure also exceeded forecasts which had predicted the UK’s declining construction sector, coupled with a slight manufacturing slowdown, would lower the total.

“While a figure of 0.5% can still be viewed as sluggish growth, it is heartening to see a move away from the fears of stagnation," commented Jeremy Cook, Chief Economist at World First currency brokers.

Manufacturing jumped to post 0.5% growth, compared to Q2’s 1.2% contraction. Analysts ascribed the shock decline to production chain disruptions in the wake of the Japanese Tsunami, and recent gains have been driven by an increased focus on international trade.

The news will be welcomed by the Coalition Government who have been faced with mounting pressure to ease the deficit reduction programme in order to stimulate growth. Q2's GDP flatline had been interpreted by Chancellor Osborne as a result of the Tsunami and the Royal Wedding bank holiday; an excuse that was criticised by opponents. But today's 0.5% jump suggests the government's official explanation may be accurate.

The UK’s crucial services sector increased output by 0.7%, reversing the declines seen earlier in the year. Within the sector, business services and finance fared the most positively, growing by 0.8%.

Jeremy Cook, however, predicts the news for the fourth quarter will be less positive than today's, as the UK's chief trading partners in the Eurozone continue to struggle.

“One figure that may get lost in all the GDP congratulations is news that the PMI for the UK manufacturing sector has fallen back below the crucial 50.0 level, which denotes expansion. These falls in manufacturing production, in combination with the impact of the European debt crisis, already mean that unfortunately the figure for Q4 is likely to be worse than Q3.”


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