Economic growth predicted to be 0.2% in June

Economic growth is predicted to be 0.2 per cent in June, almost the same as the growth in May.

The National Institute of Economic and Social Research (NIESR) finds the difference between May and June is "not of importance" and the period of low growth is set to continue.

"Our analysis assumes retail sales have fallen back in June after the May blip and also that growth in public sector services is slower than in the first quarter of the year," NIESR said.

The prediction comes after figures released this morning by the Office for National Statistics (ONS) showed manufacturing output slumped 0.5 per cent in May.

Although growth has slowed considerably, this does not signify a decline in gross domestic product (GDP), the think tank said.

NIESR said: "These data confirm the general impression of weakness in the British economy, but, although quarterly falls in output are possible in the near future, it remains most unlikely that output in 2008 will be lower than in 2007."

Despite the data, the economists warn not to expect an interest rate reduction when the Bank of England's monetary policy committee meet on Thursday.

"We remain of the view that, despite these data, inflationary pressures and the risk of rising inflationary expectations mean that there is no room to reduce interest rates, and that an increase may be needed," NIESR added.

Official figures on GDP growth will be available on July 25th. NIESR says its track record for correctly predicting the GDP has a standard error of between 0.1-0.2 per cent when compared to the government figures.