* What: Preliminary UK GDP data for Q3
* When: Friday, Oct. 23 at 0830 GMT
* GDP is expected to grow 0.2 pct q/q after 0.6 pct Q2 drop
By David Milliken
LONDON, Oct 22 (Reuters) - Britain's economy may have staged a cautious return to growth between July and September, ending five quarters of deep recession, official data due on Friday is expected to show.
Third-quarter gross domestic product is forecast to have grown 0.2 percent over the quarter after a 0.6 percent fall between April and June, according to a Reuters poll of 35 economists.
That would reduce the year-on-year rate of decline to 4.6 percent from the 5.5 percent drop in the second quarter of 2009, which was Britain's sharpest annual economic contraction since quarterly records began in 1955.
The data, released by the Office for National Statistics at 0830 GMT, is likely to be keenly eyed by the Bank of England's Monetary Policy Committee which will decide next month whether to expand its 175 billion pound asset purchase programme, which will be complete by the end of the month.
Economists are pinning their hopes for a return to growth on the services sector, where purchasing managers' surveys have shown increasing activity in recent months.
But stagnant September retail sales and a sharp 2.5 percent drop in industrial output in August make zero or even negative growth a risk, economists said on Thursday.
Germany and France exited recession in the second quarter.
"We were fairly confident that the economy would have shown positive growth during the third quarter. We still think that's the case, but it could be touch and go due to the industrial production in August," said Philip Shaw, economist at Investec.
A failure of the economy to return to growth would likely have an adverse market impact, pushing up gilt prices and causing stocks to fall, but Shaw downplayed the longer-term effect on the outlook for monetary policy and the economy.
"There's a huge swathe of evidence that we are going to get some modest recovery in the second half as a whole and a small contraction in the third quarter wouldn't alter that prospect," he said.
Nor would a negative reading for GDP growth necessarily necessarily mean an expansion to the BoE's quantitative easing programme, Shaw said.
"The MPC is aware that initial figures can be revised heavily, and that GDP data is often revised upwards." (Editing by Mike Peacock)