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NIESR Says UK Growth Remains Below Trend

The UK economic growth continues to remain below trend amid the Brexit-related uncertainty, the National Institute of Economic and Social Research said Friday, as it released its latest monthly GDP estimate.

National output grew by 0.4 percent in the three months ending August after 0.2 percent gain in the July quarter, the NIESR said. The latest estimate equaled February's rate, but was half of the January's prediction.

Despite the modest pick up in growth momentum, the economy continues to grow below its long run trend of some 0.6 percent, the think tank added.

The NIESR has forecast 0.4 percent growth for the third quarter. The group has projected GDP growth of 1.7 percent for this year and 1.9 percent for next year.

"Service sector output as well as industrial production appears to have contributed to the uptick in GDP growth," Amit Kara, head of UK Macroeconomic Forecasting at NIESR, said.

The economy is likely to rebalance towards international trade in response to strengthening global growth and a weaker currency and away from domestic demand in the second half of this year and beyond, Kara said.

Further, household spending is likely to be weighed down by weak wage growth and investment spending held back by Brexit-related uncertainty, the economist added.

"If indeed economic growth is sustained at the 0.4-0.5 per cent level, we prescribe a 25 basis point increase in Bank Rate in the first quarter of 2018 to reverse some of the emergency stimulus that the Bank of England injected into the economy last August in response to the EU referendum result," Kara said.

by RTT Staff Writer

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