The National Institute of Economic and Social Research (NIESR) predicts that the UK will narrowly avoid slipping into a triple-dip recession.
It says the UK economy has grown by 0.1 per cent in the three months to the end of March as the UK fights to avoid falling into its third recession in five years.
NIESR says that activity in production sector reversed the decline seen in the previous quarter. However, NIESR says that both production sector output and that of the broader economy has been essentially flat in the first quarter.
It says the UK economy will grow by 0.7 per cent over the whole of 2013, slightly above the revised forecast issued by the Office for Budget Responsibility (OBR) at the time of the budget last month of 0.6 per cent.
There was also no change to the length of time NIESR expects it to take for the UK economy to fully recover from the financial crisis. It says "we do not expect output to pass its peak in early 2008 until 2015."
Recent economic data suggests that growth in the service sector should cover the slight fall in activity seen in the manufacturing and construction sectors in the first few months of the year.
However, official data from the Office for National Statistics (ONS) released yesterday showed that the UK’s trade balance widened as the UK continues to import more than it exports. The conflicting news on the economy continued as it was revealed that industrial output, a key area that helped push GDP into negative territory in the last quarter, recovered in February.
Most economists still believe it is touch and go as to whether the economy will have shrunk in the first quarter, but the consensus seems to be that the odds slightly favour growth after the latest set of figures also showed healthy retail sales in March despite the snow and cold weather.
Howard Archer, Chief UK & European Economist at IHS Global Insight said: “Mixed implications for UK first-quarter growth prospects as a much larger than expected rebound in industrial production in February was countered by a significantly wider than anticipated trade deficit.
“On balance though, with the British Retail Consortium’s latest survey indicating relatively decent retail sales in March, the odds have probably tilted a little further in favour of the UK avoiding contraction in the first quarter of 2013, and perhaps even eking out marginal growth.”
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