Britain's economy grew 0.5 percent in the third quarter of this year, official data confirmed on Wednesday, in what is likely to be the last piece of moderately upbeat news for some time as the country veers perilously close to recession. Growth was the best in any quarter for a year, but was driven by factors that are unlikely to withstand the deepening eurozone debt crisis and ongoing government fiscal contraction.
A sharp increase in firms' inventories and government spending drove growth, with a rebound from disruption in the second quarter, when there was a public holiday to mark a royal wedding and Japan's tsunami hit supply chains, also helping.
--- BoE and economists see sharp slowdown in Q4
"The detail reveals some very interesting and worrying trends which strike a significant blow to short-term growth prospects," said Andrew Goodwin, an economic advisor to accountants Ernst & Young. Bank of England policymaker Ben Broadbent said there was a 50 percent chance that Britain's economy would contract in the fourth quarter, in an interview broadcast on CNBC. Last week the BoE forecast an annual pace of growth of just 0.7-0.8 percent for most of 2012.
Slow growth and unemployment at a 17-year high are increasing pressure on finance minister George Osborne to announce measures to boost the economy in his autumn statement next week, but he is hamstrung by his tough deficit reduction targets. "The UK economy is not immune to the turbulence in the eurozone and its impact on British businesses. The government is using all levers to protect the UK economy and make sure that it remains a relative safe haven in the sovereign debt storm," a finance ministry spokesman said after the data.
The figures from the Office for National Statistics confirm its estimate at the start of the month that between July and September Britain's economy grew by 0.5 percent from the previous quarter, and by 0.5 percent from the third quarter of 2010. Government spending rose by 0.9 percent on the quarter in real terms, and firms' inventories rose by 2.9 billion pounds, the biggest rise for a year and one that added 0.7 percentage points to quarterly growth.
Household spending was flat, the first time it has not fallen for over a year, while Britain's trade deficit knocked 0.4 percentage points off the rate of growth, as exports continue to fail to meet official hopes that they will lead Britain into a solid recovery. The Confederation of British Industry's monthly industrial trends survey showed British factory orders fell at their fastest pace in over a year in November due to a slump in eurozone export demand.