Has The UK Economy Turned A Corner?

Has The UK Economy Turned A Corner?

The stunning 1% increase in GDP for the third quarter saw the UK exit its first double-dip recession in style. The market had expected a 0.6% increase, up from the 0.4% contraction in the second quarter.

But the 1% expansion in Q3 GDP may not reflect the underlying growth rate in the economy due to some special factors that could have boosted growth last quarter:

1, The one extra working day in Q3 compared to Q2 due to the Queen’s Diamond Jubilee bank holiday.

2, The Olympics and Paralympics

The ONS has said that the impact of the Jubilee holiday on the economy is not possible to quantify at this stage, however it will carry out retrospective analysis, which suggests that there could be further revisions to Q2/ Q3 data down the line.

The impact of the Olympics and Paralympics is slightly more quantifiable. Ticket sales were estimated to have had a 0.2% increase on GDP. Although tickets were sold in tranches for the Games between 2011 and 2012, the national accounts allocate them to the third quarter when the tickets were actually used. The ONS also noticed positive impacts on employment, the arts and entertainment sector, higher hotel occupancy rates in London over the period of the Games and strength in the food and drink sector. In sectors like office administration and retail sales the impact of the Olympics was more mixed, for example online retail sales were seen to be negatively affected as people watched the Games rather than purchased goods on the internet.