UK growth rate revised upwards

UK GDP growth has been revised up to 0.6 per cent from 0.5 per cent.

The annual rate of growth remained unrevised at 0.5 per cent, according to figures from the Office for National Statistics (ONS).

Analysts said Thursday's figures did not change their view that the economy was set for a sharp slowdown due to the deepening euro zone crisis, which threatens to wreak havoc in Britain's biggest export market.

"Our expectation is that the UK is about to undergo a short recession," said Philip Shaw, economist at Investec. "It's pretty clear that 2012 is going to be a challenging year."

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 per cent from GDP.

A sharply deteriorating growth outlook and worries that the euro zone 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.

"It remains odds-on that the BoE will undertake further QE early in 2012 to try and boost the struggling economy," said Howard Archer, economist at IHS Global Insight.