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RECESSION OVER FOR BATTERED BRITAIN

A TOP think-tank yesterday called an end to the bitter recession that has been crippling Britain, in a move that was welcomed across the City last night.<br /><br />The National Institute for Economic and Social Research (NIESR) said output grew 0.1 per cent in May and 0.2 per cent in April. Martin Weale, its director, said that these figures suggest we are through the worst. &ldquo;On the basis of what I know at the moment, the recession is probably over but there could be another downward dip in the third quarter. I estimate flat output growth in the second quarter.&rdquo; The NIESR data suggests that the UK has become the first large wealthy economy to exit the recession.<br /><br />Alan Clarke, economist at BNP Paribas, agreed that the UK recession was over and said he had revised his GDP forecast to a bullish 0.4 per cent growth year-on-year in the second quarter.<br /><br />&ldquo;The purchasing managers&rsquo; indices released last week essentially show that the economy is expanding and NIESR&rsquo;s figures confirm that,&rdquo; he explained, but warned that while we&rsquo;re not shrinking anymore, we will not get anything like a full-blown recovery for a long while and it will not necessarily be a straight path to trend growth. <br /><br />The encouraging forecasts were reinforced by solid industrial production data, which helped propel sterling to &euro;1.17 &ndash; its highest level against the euro this year &ndash; on the back of growing investor confidence.<br /><br />Manufacturing output unexpectedly rose 0.2 per cent in April while industrial output rose 0.3 per cent over the same period, according to the Office for National Statistics (ONS), due to destocking and a weak sterling boosting UK firms&rsquo; international competitiveness. The improvement in manufacturing cheered the currency markets, but the Bank of England&rsquo;s Kate Barker said that the rise in manufacturing orders could reflect temporary restocking by firms. <br /><br />&ldquo;Manufacturing orders are starting to come back, but whether that&rsquo;s a stocking issue or a turn-up in final demand isn&rsquo;t so clear,&rdquo; she argued, adding that the current view was that interest rates could stay low for quite some time.<br /><br />Markets also appeared to shrug off disappointing trade data from the ONS, which showed that Britain&rsquo;s trade deficit widened in April to &pound;3bn, its largest since last September. <br /><br />The FTSE 100 index closed up 0.7 per cent at 4,436.75, a gain of 31.96 points.