Britain exits recession

Britain left recession in the third quarter after posting its strongest quarterly GDP growth in five years, official data showed on Thursday, although temporary effects may have masked a weaker underlying picture.

The Office for National Statistics said Britain's gross domestic product rose by 1.0 percent between July and September after shrinking by 0.4 percent between April and June. On the year, the economy was flat.

Economists polled by Reuters had forecast a 0.6 percent quarterly rise in third quarter GDP and a 0.5 percent fall on the year.

The return to growth after three consecutive quarters of contraction is welcome news for a coalition government under pressure to do more to revive the economy and shaken last week by the resignation of a senior minister.

However, the third quarter reading was boosted by ticket sales for the London Olympics and a rebound from the previous three months when an extra public holiday dented output.

Bank of England Governor Mervyn King cautioned on Tuesday that the recovery would remain slow, with threats posed by the euro zone debt crisis and a cooling of the fast-growing economies of India, China and Brazil.

Nevertheless, investors scaled back expectations for another cash boost from the BoE as King said policymakers would think "long and hard" before extending the currently approved 375 billion pounds of quantitative easing bond purchases.

The ONS said the British economy had grown by 0.3 percent so far this year.

After falls in unemployment and inflation last week, ministers will seize on the latest GDP figures as evidence their economic plans are on track. The opposition Labour Party has accused the coalition of holding back the recovery by sticking too tightly to its austerity plans to eliminate the budget deficit.

Britain has not fully recovered the output lost during the 2008-2009 slump that has left many Britons worse off and the economy slipped back into recession at the end of last year.

Output in Britain's service sector - which makes up more than three quarters of GDP - rose by 1.3 percent in the third quarter after falling 0.1 percent in the second quarter. That was the strongest quarterly growth since the third quarter of 2007.

Industrial output was 1.1 percent higher, the strongest rise since the second quarter of 2010. Construction - which accounts for less than 7 percent of GDP - contracted by 2.5 percent.

(Reporting by Olesya Dmitracova and Peter Griffiths)