UK economy grows 0.6 per cent


UK economy grows 0.6 per cent
The UK economy grew by 0.6 per cent in the three months to June, according to today's estimate from the National Institute of Economic and Social Research (Niesr).

The thinktank's latest prediction of economic growth is the same as that reported last month for the three months to May.

But Niesr stressed that the current growth rate was still down from the 0.7 per cent growth it recorded in the first quarter of the year, as a result of a slowdown in industrial production.

The institute claims that industrial production remained flat in the three months through to June, although figures released by the Office of National Statistics (ONS) yesterday showed a 0.7 per cent increase in manufacturing output in the quarter up to May, following an anomalous dip in April.

Rejecting the Bank of England's view that economic growth is continuing to rise without fuelling inflation, Niesr said policymakers should have raised interest rates in order to curb global inflationary pressures.

The bank's monetary policy committee (MPC) voted to keep the UK's benchmark interest rate at 4.5 per cent for the 11th consecutive month, yesterday.

Policymakers predict that the UK's economy is set to expand by 2.6 per cent this year, but stress that the level of inflation is likely to stabilise after breaching the MPC's two per cent target in May as a result of rising energy costs.

But arguing for the need to increase the UK's benchmark interest rate in order to keep inflation under control, Niesr said in a statement: "Given the rise in inflationary pressures internationally, our view remains that interest rates should have been raised."

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