LONDON - Britain's economy unexpectedly grew faster than first thought between July and September, thanks to stronger services and construction output, the Office for National Statistics said on Thursday.

However, the economy did not grow at all in the second quarter, and economists forecast a sharp slowdown at the end of this year and early in 2012.

ANALYSTS' VIEWS:

THOMAS COSTERG, STANDARD CHARTERED BANK:

Details show that a solid inventory boost (contributing 0.6 percentage points to headline growth) masks still-subdued underlying activity, indicating that UK activity remains highly vulnerable to shocks.

The most worrying news came from the Q3 current account deficit, the highest since records began in 1955 and the highest as a percentage of GDP since 1990.

This shows that the rebalancing of the UK economy is facing huge challenges, despite weak pound.

Our view remains that the UK could have entered recession this quarter, owing to still-weak activity at home, increasing headwinds from the euro-area debt crisis and slower global trade growth.

Overall we expect UK's GDP to contract 1.3 percent in 2012. This expected recession means a high risk of missing budget targets in coming months.

PHILIP SHAW, INVESTEC:

The GDP figures don't change the big picture. One could argue that output fell very slightly over Q2.

But what matters is how soft the economy is looking ahead, and the duration of any downturn.

Our expectation is that the UK is about to undergo a short recession. We think from the first quarter on, but it is possible that contraction actually began in Q4 this year.

It is pretty clear that 2012 is going to be a challenging year.

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KEY FIGURES FOR FINAL Q1 GDP

(previous estimates in brackets)

Q3 2011 Q2 2011 FORECAST

% QQ 0.6 (0.5) 0.0 (0.1) 0.5

% YY 0.5 (0.5) 0.6 (0.6) 0.5

KEY POINTS

- Biggest qq rise in GDP since Q3 2010

- Biggest qq rise in industrial production output since Q4 2010

- First time household consumption has not fallen since Q3 2010

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KEY FIGURES FOR Q3 BALANCE OF PAYMENTS

(previous estimates in brackets)

Q3 2011 Q2 2011 FORECAST

Current balance -15.226 -7.386 (-2.022) -6.05

(billion pounds)

KEY POINTS

- Biggest current account deficit since quarterly records began in 1955. That is equivalent to 4 percent of GDP, the highest current account deficit as a percentage of GDP since Q2 1990 . The ONS said the deterioration in the current account deficit was due to a big fall in investment income and a widening in the goods trade deficit.