Britain's economy unexpectedly grew faster than first thought between July and September, official figures showed, but they also revealed that growth was on shaky foundations and analysts said the economy may be about to slide into recession. The Office for National Statistics revised up third-quarter GDP growth to 0.6 percent on the quarter from an earlier estimate of 0.5 percent, but it revised down its second-quarter estimate to show the economy stagnated between April and June.
Analysts said Thursday's figures did not change their view that the economy was set for a sharp slowdown due to the deepening eurozone crisis, which threatens to wreak havoc in Britain's biggest export market. Last month finance minister George Osborne had to announce extra austerity measures after the independent Office for Budget Responsibility slashed its 2012 growth forecast by more than half to just 0.7 percent.
The upward Q3 revision was driven by firms building up stocks rather than selling to consumers at home or abroad. Output by the services and construction sectors was revised up, but industrial output was cut in half. Growth was further undermined by a record trade deficit, which subtracted 0.4 percent from GDP.
A sharply deteriorating growth outlook and worries that the eurozone debt crisis will tip Britain back into recession encouraged the Bank of England to restart its quantitative easing programme in October. The central bank has left the door open for further stimulus in February, and most economists reckon it will inject as much as 75 billion pounds on top of the 75 billion it added in October.
The ONS said the current account deficit more than doubled in the third quarter to 15.226 billion pounds - the highest since quarterly records began in 1955, and the biggest as a share of GDP since 1990 at 4 percent. The deterioration was driven by a record goods trade deficit of 27.569 billion pounds, as well as a 90 percent drop in investment income on the quarter. Third-quarter business investment was revised up to show growth of 0.3 percent compared with an earlier estimate of a 1.4 percent fall. Household spending was flat on the quarter - the first time in a year it has not fallen - and real household disposable income rose 0.3 percent.