Ruth Mitchell

GDP sees unexpected growth of 0.5% in Q3

Gross Domestic Product has grown by 0.5% in the third quarter of 2011, the strongest quarterly increase in four years.

Despite this, Reuters reports that the government is still under pressure to boost growth as uncertainty in the euro zone continues to create fresh risks.

Commenting on the latest GDP figures, Graeme Leach, Chief Economist at the Institute of Directors, said: “You can’t see the road ahead from the rear-view mirror: today’s GDP figures are welcome news, but they fail to capture the dramatic events of recent weeks in the eurozone.”

The services sector accounted for 76% of total GDP, contributing the whole of the 0.5% increase. A small positive contribution from the production industries was offset by contraction in the construction sector.

This year’s GDP growth has been wholly dependent on the services sector, which has contributed 0.9% to GDP growth during 2011.

Construction reduced growth by 0.3%, and production by a further 0.1%. Within the production industry, manufacturing increases was offset by a reduction in mining and quarrying growth.

John Dance from Vertem Asset Management echoed Mr Leach’s sentiments. he added:

“The good GDP figure is slightly inflated by the previous quarter, but any positive effects have been diminished by poor PMI figures.

“In manufacturing, a small level of growth was anticipated, but instead we witnessed significant contraction and as this is a more forward looking figure, it could indicate more bad than good is set to come.

“The question, which now remains in this age of austerity, is what can the government do to boost growth?”

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