Chancellor Jeremy Hunt warned there is a “tough road ahead” despite the rebound.
The data from the Office for National Statistics showed the service sector was the main driver in growth with a jump in retail sales.
But it’s thought the bounce back in growth was in large part down to the bank holiday for the Queen’s funeral in September, with the economy shrinking by 0.6 per cent a month prior in September.
The longer-term expectation is that the UK is heading for recession next year thanks to slowing growth and high inflation.
Rebound could see a .75 per cent lift in bank rate
The rise in growth could also tip the Bank of England into bumping interest rates up faster than previously expected.
Ruth Gregory, senior UK economist at Capital Economics, said: “The surprisingly strong rise could tilt the Bank of England towards another bumper 75bps interest rate hike on 15 December, rather than 50bps, depending on the labour market and inflation data on Tuesday and Wednesday.”
Overall, GDP fell by 0.3 per cent in the three months to October 22 compared with the three months to July 2022.
Chancellor Jeremy Hunt said: “High inflation, exacerbated by Putin’s illegal war, is slowing growth across the world, with the IMF predicting a third of the world economy will be in recession this year or next.
“While today’s figures show some growth, I want to be honest that there is a tough road ahead. Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin’s war and high global gas prices.
“Our plan has restored economic stability and will help drive down inflation next year, but also lays the foundations for long-term growth through continued record investment in new infrastructure, science and innovation.”
A grim outlook for the UK
George Lagarias, chief economist at Mazars, added: “October GDP grew slightly more than expected, at 0.5 per cent, mostly due to an improvement in retail sales. Today’s number does little to change the grim outlook for the UK economy.
“Markets still expect a recession early next year. Demand is set to be weak, as high energy prices persist and winter has really just begun.”
