UK Economy dipping
There was more evidence of weak underlying health in the UK economy as a leading think-tank forecast a slowdown in growth in the three months to October.
The National Institute of Economic and Social Research (Niesr) predicted that output grew by 0.5% in the period, following 1% growth in the three months to September.
The British economy is now around 2.8% smaller than before the onset of the recession at the start of 2008, Niesr added.
Official figures confirmed the longest double-dip recession since the 1950s was over as growth returned in the third quarter – but economists warned the underlying picture was much bleaker.
Despite the strong headline growth, economists warned that one-off factors such as the Olympics distorted the performance.
The forecast comes after a run of downbeat purchasing manager surveys for October covering the services, manufacturing and construction sector.
The powerhouse services sector, which makes up 75% of the economy, slowed to a near two-year low last month due to weaker new business.
Niesr warned: “Unless output turns down again, the recession is over, while the period of depression is likely to continue for some time.”
The Bank of England’s decision this week to increase or hold quantitative easing will be a close call as the strong third-quarter data is repeatedly overshadowed with weak surveys and research.
Most economists had expected the Bank’s Monetary Policy Committee (MPC) to hold off from any further economy-boosting moves when they gather this week but this has proved to be less certain.