UK economy bounces back in Q3

The UK economy ground to a halt in the second quarter of the year, revised figures revealed today, but bounced back between July and September with stronger growth than previously estimated.

Gross domestic product (GDP) grew at 0.6% in the third quarter, revised up from a previous estimate of 0.5%, the Office for National Statistics (ONS) said, while growth between April and June was slashed to zero from 0.1%.

The third quarter was boosted by better than estimated growth in agriculture, construction and services, while the second quarter was hit by weaker-than-estimated figures in the services sector.

Economists have warned the third quarter was flattered as the economy played catch-up from the previous three months, which was hit by the extra bank holiday from the royal wedding and impact of the Japanese tsunami, so the overall picture of the year has been left broadly unchanged by the revisions.

Chris Williamson, chief economist at financial services information company Markit, said: "The underlying trend is very clearly one of an economy that is struggling in the face of what seems to be an ever-growing list of headwinds."

Manufacturing, services and trade surveys have been mixed so far in the final quarter of the year, prompting fears that the UK is heading for a double-dip recession.

The tax and spending watchdog, the Office for Budget Responsibility, recently slashed official forecasts for growth, following a similar downbeat assessment of the economy from the Bank of England.

The powerhouse services sector, which makes up some 75% of the total economy, grew at 0.7% in the third quarter, up from a previous estimate of 0.6%.

Agriculture grew at 0.5% in the third quarter, while construction was ahead 0.3%.

But industrial production growth was revised down once again to 0.2% from 0.4%, which partially offset improvements in the stronger sectors.

The squeeze on household spending was underlined by figures revealing real disposable income growth slowed to 0.3% in the third quarter from 1.3% the previous three months.

Government spending was also revised down to 0.2% from 0.9% - which corresponds more closely with Chancellor George Osborne's programme of deficit-busting spending cuts.

Looking back to the second quarter, growth in the services sector was revised down to 0.1% from 0.2%.

Labour Treasury spokeswoman Rachel Reeves said: "These revised figures show an unchanged picture over the last year. The British economy has been flatlining over the last 12 months, when we need strong growth to get unemployment and the deficit down.

"Only a complacent Chancellor would take comfort in figures showing just 0.5% growth in the year since his spending review. This compares to an upwardly revised figure of 3% growth in the previous 12 months when government policies were supporting rather than undermining the economic recovery.

"The fact is tax rises and spending cuts which go too far and too fast have crushed confidence and choked off the recovery in Britain over a year ago, well before the recent eurozone crisis.

"Over the Christmas break David Cameron and George Osborne need to reflect on what's happened in the last year and wake up to the scale of the jobs and growth crisis facing our country.

"Instead of ploughing on with failed policies, they should listen to the IMF, change course and get a real plan for jobs and growth that will get the deficit down in a fairer, better way."