Growth at 0.5 per cent-should we be worried?

So the growth figures are just out.

The UK economy has grown by 0.5 per cent over the three months to September according to the office of National Statistics

The figure is up on the 0.1 per cent growth in the second quarter of 2011 which the ONS said had been affected by one-off factors such as the Japanese tsunami and the extra bank holiday..

The headlines are that output of the production industries increased by 0.5 per cent compared with a fall of 1.2 per cent in the previous quarter with construction sector output decreased by 0.6 per cent in 2011 Q3, compared with an increase of 1.1 per cent and services increased by 0.7 per cent compared with a rise of 0.2 per cent in the previous quarter.

Meanwhile stock markets are falling after digesting the news from late yesterday that Greece will put the debt package to a referendum.

The FTSE 100 Index opened more than 2 per cent lower whilst Germany's Dax was 4.3 per cent down and the Cac-40 in France lost more than 3 per cent.

Responding to the figures,Labour's shadow chancellor Ed Balls said that today's figures confirm that the British economy has been bumping along the bottom for the past twelve months - flatlining when we need strong growth to get unemployment and the deficit down.

He added that

“Already, the stagnant growth and higher unemployment that George Osborne's failing policies have delivered mean the government is set to borrow £46 billion more than they planned. After today's figures, the Chancellor will now have to downgrade his growth forecasts for a fourth time later this month - and revise up again his borrowing forecasts.

Meanwhile the Institute of Directors Chief Economist James Leach said


“You can’t see the road ahead from the rear-view mirror: today’s GDP figures are welcome news, but they fail to capture the dramatic events of recent weeks in the eurozone. GDP growth is almost certain to flatten off, or even fall, in the fourth quarter of this year due to postponed business investment and consumer caution, even if the eurozone crisis stabilises. Unfortunately we don’t think the crisis is over, it will continue to haunt recovery prospects in the UK.”