Economy still stuck in slump, estimates suggest

The economy shrank by 0.4 per cent in the three months to the end of October, an unchanged rate of contraction from the third quarter, the National Institute of Economic and Social Research (NIESR) has estimated.

The projection of continued weakness came after official figures showed that industrial production in September had picked up after factory stoppages caused a sharp fall in output during the summer, but there were no signs yet of a sustained upturn.

NIESR director Martin Weale, said: ‘People have been hoping for a clear recovery and that isn’t visible yet. The past pattern doesn’t lead us to think there has been a strong turnround.’

Mr Weale foresees the economy bouncing along the bottom at depressed levels of output for some time, even if spending brought forward to the fourth quarter to avoid the hike in VAT rates early next year provides a modest boost to growth in the short term.