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Think-tank deals blow to growth

The UK's economic growth prospects were dealt a blow when a leading think-tank estimated that GDP grew by just 0.1% in the second quarter of 2011.

The National Institute of Economic and Social Research (NIESR) said growth had slowed from 0.5% in the first quarter, partly because of a weak performance in April which was disrupted by the bank holidays around the royal wedding and Easter.

The body said that although the figures may have been distorted by one-off events such as the wedding, the underlying growth rate was likely to be weak. The figures did not provide a picture of economic growth that would support a hike in interest rates, the institute added.

Official figures showed that the UK's economy grew by 0.5% in the first quarter of 2011, after a 0.5% decline in the final quarter of 2010, meaning the economy effectively flatlined for six months.

Many economists expect GDP to rise by 0.3% in the second quarter of 2011. But the NIESR said their predictions are normally accurate to within 0.1% or 0.2%. The NIESR said it does not expect the UK's output to pass its pre-recession peak until 2013.

It said the 0.1% growth in the three months to the end of June compared with 0.5% growth in the three months to the end of May, as the figures replaced a strong March with a weak June.