Byline: RHODRI EVANS
FEARS of a double dip recession relaxed yesterday on the back of better-than-expected figures for economic growth.
Figures from the Office for National Statistics pointed to a 0.8% increase in gross domestic product (GDP) in the three months to September.
Analysts had widely expected growth for the quarter to come in at around 0.4%, with the rate announced yesterday at the very top end of the range of forecasts.
Economic growth over the past six months has now hit 2%, which is the fastest pace of expansion seen over two consecutive quarters for 10 years. While growth was widespread across all sectors, the largest contribution came from business services and finance.
The construction sector grew by 4% in the third quarter, down from 9.5% in quarter two, while the production industries sector grew by 0.6%, albeit with a decrease of 0.7% from mining and quarrying.
Year-on-year growth has now recovered to levels seen before the recession, reaching 2.8% in the third quarter - the highest annual rate of expansion since 2007.
While the figures are only a preliminary estimate and may yet be revised, they have helped to alleviate concerns that the Government's belt-tightening could push the UK into a double dip recession.
The figures are also likely to reduce pressure on the Bank of England to embark on a second round of quantitative easing, which would have increased the money supply to boost the economy if necessary.
Leading Welsh economists last night agreed the figures were good news for the economy.
Cardiff University economist Professor Patrick Minford, a former adviser to the Thatcher government, welcomed the figures.
He said: "The feeling is that the economy is recovering and this is confirmation of that.
"I think it lessens the possibility of a double dip. The fiscal package has been very much as expected. It is very much what Labour had pencilled in.
"If the UK is doing well then you would expect Wales is not far off."
But Professor Minford warned that continued growth may fuel inflation.
"The fact is that a number of people are now moving towards thinking that the control of money needs to be tightened." he said. "It is encouraging news but it also means we have to watch the inflation numbers."
Professor David Blackaby of Swansea University's School of Business and Economics said: "This is excellent news. For the British economy to grow 0.8% means the forecasters have got it wrong."
However, the economist sounded a note of caution, warning that it would be some time before the full impact of the measures unveiled in the Chancellor's recent spending review were felt.
"We're at a crucial point in terms of where the economy goes," he said. "There has been a lot of talk about the spending review and people have lost their jobs, but it is not until 2011-12 when the real job losses will hit.
"We have only just entered that period where the public sector will be contracted, and whether the private sector can take its place remains to be seen. But on the whole people are saying we can avoid a double dip recession."
Business leaders in Wales also welcomed the figures.
Robert Lloyd Griffiths, director of the Institute of Directors (IoD) Wales, said: "The GDP numbers are better than expected given the recent spate of indicators suggesting a much weaker performance.
"The key question is whether it will last, and that's where the IoD is more cautious. The likelihood of a further extension in Quantitative Easing has diminished but not disappeared. "The economy is about to sail through choppy waters and it would be a mistake to focus all our attention on fiscal policy. …