UK GDP growth better than expected

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Growth of 1.1% is almost double what even optimists were predicting.

The Office for National Statistics has reported that UK gross domestic product grew by 1.1% in the second quarter of 2010 – the single best quarterly performance for four years.

The preliminary estimate of GDP by the ONS will come as something of a surprise to most commentators, being that it is a strong performance. The results will also ease fears of a double-dip recession and give credibility to the government’s stance that severe cuts now will not be too much for the market to take.

Most economists were predicting a 0.6% growth in GDP at best, based on the 0.3% rise in the previous quarter.

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The growth is attributable to increased activity in all key sectors – services, construction and production. The largest contribution to the growth came from business services and finance, but there was also significant growth in hotels, distribution, restaurants and in government and other services. The transport, storage and communication industries declined.

Former Labour chancellor Alistair Darling, however, warned against optimism and said the coalition government’s austerity measures could derail further recovery. He said: "With depressed export markets, unemployment remaining stubbornly high and consumer confidence extremely fragile as people fear for their jobs, the worst conclusion that could be drawn today is that recovery has now been secured. Deficit fetishism still risks a return to a flat line economy."

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