UK GDP growth slumps to half previous rate, NIESR data shows

UK economic growth halved in the last three months, according to analysis by a respected independent think tank, which is worse than the market expected and adds credence to predictions that the economy will contract in the third quarter and then fall into recession.

Based on its estimates, the National Institute of Economic and Social Research (NIESR) calculated that gross domestic product (GDP) grew by 0.3% in the three months ending in July, down from 6% in the three months to end-June and short of consensus City forecasts for a 0.4% increase.

NIESR said the estimate was consistent with its latest quarterly forecast of a 0.2% contraction in the third quarter.

The thinktank estimates that there is an even-money chance of a technical recession between the third quarter of 2016 and the final quarter of 2017.

James Warren, a research fellow at the institute said this was as marked economic slowdown.

"The month on month profile, suggests that the third quarter has got off to a weak start, with output declining in July. Our estimates suggest that there is around an evens chance of a technical recession by the end of 2017.”

The month on month profile suggests output declined in July by 0.2%, though NIESR stressed that monthly calculations are volatile and cautioned against "over-interpreting developments in the fundamentals of the economy from any single month".

NIESR uses a model of private services output based on indicator variables so while figures for calendar quarters are fully coherent with ONS data, estimates of monthly private service output are not.

"The series can be thought of as indicating the underlying value of the ONS series," it said.