Official figures show that the British economy grew by 1 per cent in the three months to September, bringing an end to the double-dip recession.
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Following nine months of negative growth, the Office for National Statistics (ONS) has revealed that the Olympics helped the economy return to growth at its fastest pace in five years between July and September. It comes after a 0.4% decline in the previous quarter.
Olympic ticket sales alone increased GDP growth in the period by 0.2 percentage points, but the event is likely to have lifted a range of other areas within the economy.
Industrial production increased by 1.1 per cent, following a 0.7% decline in the previous quarter.
But despite the welcome news, the economy is still weak and further setbacks are possible.
The construction sector remained under pressure, shrinking 2.5 per cent, following a 3 per cent drop in the previous quarter.
Chancellor George Osborne told Channel 4 News Economic Editor, Faisal Islam, that the UK still faced "many economic challenges at home and abroad".
But he said the economy is recovering, even when taking into account the temporary boost provided by the Olympics and the Jubilee.
"Of course we should welcome today's figures. We I think we should understand the one-off factors- Jubillee holiday, the Olympics.
"But if you take the last two quarters together- this quarter with the rather weaker, disappointing last quarter- you see some underlying growth. And I think we have to keep on with plans to deal with our debts, pay our way in the world and compete in the global race in the future," Mr Osborne said.
But he went on: "By continuing to take the tough decisions needed to deal with our debts and equip our economy for the global race we're in, this Government is laying the foundations for lasting prosperity."
Output from April to June was hit by the extra bank holiday for the Queen's Diamond Jubilee, which reduced growth by 0.5 per cent, according to the ONS.
The National Institute of Economic and Social Research (NIESR) estimates that output grew by 0.8 per cent in the third quarter of 2012.
But it says this "robust" growth is "largely an artefact of special events" and that growth is likely to be "at a significantly slower pace in the coming quarters". As such, it believes underlying growth is likely to be 0.2-0.3 per cent.
The economy has been damaged by months of negative growth and the NIESR does not expect gross national product to reach 2008 levels until 2014.
a good figure... No wonder Cameron was grinning. Not a real boom, but it's solid steady growth, even allowing for the Jubilympic distortions— Faisal Islam (@faisalislam) October 25, 2012
The recession and inflation have taken their toll on living standards, according to research from the ONS published on Tuesday.
The ONS said incomes fell by more than 13 per cent this year compared to the start of the recession four years ago.
There is concern that the coalition government's emphasis on tax rises and spending rises to cut Britain's deficit is hitting growth.
Chancellor George Osborne said at the time that the IMF was not taking account of the measures taken by the Bank of England - quantitative easing - to help the recovery.
Output was negative in the final three quarters of 2008 and the first two quarters of 2009. It then picked up during the rest of 2009 and most of 2010, before falling again in the last three months of the year.
There was growth through most of 2011, but the economy shrank again from October to December and remained in negative territory in 2012.