Daily Mail Reporter
Last updated at 3:55 PM on 08th September 2009

The UK recorded its first quarterly growth since May last year in the three months to August, a respected economic forecaster said today.

The National Institute of Economic and Social Research's latest estimate showed a 0.2 per cent rise in output after a 0.3 per cent decline in the three months to July.
NIESR said the figures reinforced its view that the recession ended in May - although the body predicted earlier this year that the downturn would end in March.
However, the forecaster warned a return to growth should not be confused with a full economic recovery.

It added: 'There may well be a period of stagnation now, with output rising in some months and falling in others; the end of the recession should not be confused with a return to normal economic conditions.'
Experts predict the Office for National Statistics' estimates for output between June and September will show a return to growth after a 0.7 per cent drop in the second quarter.
More...Public spending will have to be cut but not yet, admits Darling

The new forecast came as manufacturing figures today showed a 0.9 per cent rise in output between June and July, boosted by recovering production in the car industry.
It was the sector's best performance in more than three years and outstripped experts' expectations who had only predicted a 0.3 per cent increase.
The wider measure of industrial output, which includes energy production, rose by 0.5 per cent on the month.

Sterling climbed more than 1 per cent against the dollar on the back of the encouraging data and on the dollar's broad fall.

Analysts said the figures suggested Britain's economy may be on track to emerge from recession.

'Today's data reinforce our view that the UK economy is on course for positive growth in Q3,' said Colin Ellis, economist at Daiwa Securities.
Even if production is unchanged in August and September, manufacturing output would be on course to grow some 1.0 percent in the third quarter, he added.
The data bolstered the pound, which was already rising on a sharp drop in the dollar against a number of currencies.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, hit its lowest level since September 2008.
Shortly after 2pm, sterling was up 1 per cent at $1.652 after rising to $1.659 - its highest level since August 21.
However, sterling made little headway against the euro.

The money markets are still wary of further monetary easing, which could be decided at the Bank of England's policy meeting later this week.
The UK's central bank surprised traders last month by expanding its asset buying programme by a larger margin than expected.
Minutes showed governor Mervyn King and two other members of the panel had voted for an even larger increase.

Markets shrugged off a survey showing British retail sales fell on the year last month for the first time since May.

The British Retail Consortium said the value of like-for-like sales fell 0.1 percent in August compared to the same month last year after a 1.8 percent annual gain in July.

Alistair Darling said today that the Government would have to cut spending when the economy had fully recovered but did not spell out where the axe would fall.
He insisted it would be wrong to curtail spending and investment now because it would risk 'choking off' the recovery before it has even properly begun.


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