GDP: No miracle cure but pretty good news

Investigative journalists at the New York Times have made the startling discovery that members of Chinese premier Wen Jiabao's family have become extremely wealthy during the years of his leadership. The news will come as a shocking surprise to anyone who takes no notice whatsoever of current affairs or the world around them.

In a similar vein, some of today's newspapers are doing their best to drum up astonished excitement about yesterday's revelation that Britain's gross domestic product (GDP) grew by 1.0% in the third quarter of the year. The Daily Mail trumpets "UK economy is the best in Europe! We're leading the way, say experts, and will do until at least 2015". Elsewhere though, a more realistic attitude prevails. The Daily Telegraph warns "GDP: Don't get carried away, urges Treasury" and the Guardian soberly reports a "Cautious welcome to growth figures".

A good chunk of the growth reported yesterday was technical in nature, carried forward from the second quarter as a result of bank holiday alterations and the accounting treatment of the Olympic Games. The effect was to exaggerate both second quarter weakness and third quarter strength. Nevertheless, a result is a result almost no matter where it comes from. That was the attitude of investors when they were presented with a figure well above the consensus forecast of 0.6% and better even than the 0.8% that the more optimistic of them had been looking for.

There was a rush to buy the pound, which strengthened against everything on the day. Its best achievement was the 1% gains against the Australian and New Zealand dollars and the Swedish krona. The krona's problem was a hint from the Riksbank that SEK interest rates would move lower. The Kiwi's stumbling blocks were a wider trade deficit and a speech by the incoming Reserve Bank of New Zealand governor, Graeme Wheeler, who "wishes to see a lower exchange rate".  The Australian dollar had no real excuse.

Thursday's US data showed monthly rise of 9.9% for durable goods orders in September, which looks impressive until you spot the previous month's -13.1% fall. Japan reported another month of falling prices with CPI down by -0.3% on the year. It is worth noting that the Japanese consumer price index at 99.6 today is exactly where it was 20 years ago.

On today's list are German, French and US consumer confidence, Spanish unemployment, Italian business confidence and the preliminary estimate of US third quarter GDP. The US GDP number has the same potential importance as the UK figure yesterday, not least because of the elections in a fortnight's time. The consensus forecast is for 1.9% growth in Q3 after 1.3% in Q2 and 2% in Q1.

Be aware, when comparing the US number with Britain's 1.0% yesterday, that America quotes GDP on an annualised basis. A 1.9% this afternoon would equate to a quarterly 0.5% in British parlance. Alternatively, Britain's quarterly 1.0% would appear as 4.1% if it were an American reading.

So Britain's 1.0% growth in Q2 is really pretty good, even if it does overstate the underlying situation. Have a good weekend and make the most of the extra hour of sleep on Saturday night.