Forex News
November 27, 2012 @ 11:33 am

UK economy expands 1 percent in third quarter

The UK economy rebounded from a recession and expanded by 1 percent from the second to the third quarter. According to the Office for National Statistics, the second estimate on GDP for the third quarter was the same as the original estimate.

Sterling briefly reacted positively to the news and jumped against the dollar to $1.6025 before easing back down again.

This spurt of growth follows from three straight quarters of economic slowdown and was the best quarterly expansion in 5 years.

When compared to a year ago, the British economy contracted by 0.1 percent from the third quarter in 2011.

The summer Olympics contributed to much of the spike in growth. However, this is considered to be a one time factor and thus would not be able to sustain the strength in growth going forward.

The Bank of England has predicted that the GDP growth may become negative in the fourth quarter. The data today would not be enough to sway the views of the central bank’s Monetary Policy Committee (MPC)

According to David Owen, an economist at Jeffries:

“I can’t believe that these figures will in any way influence really what the MPC is thinking at this point. They need to wait for more information about Q4 and going into Q1 of next year, because obviously we have the Olympics effect and everything else in these figures.”

“People are generally expecting GDP to have slowed sharply into the fourth quarter on the published figure or indeed to have actually contracted slightly in Q4 compared to Q3. So obviously that provisional snap of Q4 GDP will be very important for what the market expects the MPC to do next.

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