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Recession Is Over But Stagnation Will Follow

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Britain’s economy grew for the first time over a three-month period since May last year, the National Institute of Economic and Social Research (NIESR) said today but warned that the end of recession could turn to a period of stagnation.

NIESR's monthly estimate of economic growth suggests that gross domestic product (GDP) grew 0.2 per cent between June and August, after a 0.3 per cent fall in the three months to the end of July.

The influential think-tank said: "This is the first time our GDP indicator has been higher over a three-month average since May of 2008 and reinforces our view that the recession ended in May of this year."

However, NIESR 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."

The findings chime with other indicators in suggesting Britain’s economy is stabilising after suffering its sharpest contraction in decades.

Britain’s services sector grew last month at its fastest pace in over two years, according to a survey last week, while official data earlier today showed manufacturing output rose in July at its fastest pace in one-and-a-half years.

In a speech today, Chancellor Alistair Darling reiterated his opposition to reducing the Government’s fiscal stimulus package, which he said would risk damaging recovery.

He said: “Cutting support now, as some are demanding, would run the real risk of choking off the recovery even before it started and prolonging the global downturn.

“But in the medium-term we need to live within our means. Not to do so would be equally irresponsible and damage our country’s future.â€

Mr Darling set out the Government’s determination to “never risk the fiscal sustainability of our economyâ€.

He said: “This will mean, as Gordon Brown and I have already made clear, hard choices on public spending.

“We won’t flinch from these difficult decisions. But we will always be guided by our core values of fairness and responsibility.â€

NIESR specialises in estimating GDP ahead of official figures produced by the Office for National Statistics.


Haven't the NIESR been pretty crap at predicting GDP so far???

Our track record in producing early estimates of GDP suggests that our projection for the most recent three-month period has a standard error of 0.1-0.2% point when compared to the first estimate produced by the Office for National Statistics. This comparison can be made only for complete calendar quarters. Outside calendar quarters the figures are less reliable than this and they are also likely to be less accurate in the current disturbed economic circumstances.

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the end of the recession should not be confused with a return to normal economic conditions


No indeed. A post-industrial age terminal depression will look a little different

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