NIESR calls for more spending as growth stays flat

The economy will grow by 0.9 per cent in 2013, rising to 1.5 per cent in 2014, according to the latest forecasts from the National Institute for Economic and Social Research. The forecast for this year is a slight improvement on the 0.7 per cent growth NIESR expected in February, but the think-tank stresses that the reality is that the UK still has a "stagnating economy". It expects unemployment to remain roughly flat for two years at 8 per cent.

NIESR said, in line with the recent advice from the International Monetary Fund, that the Government should use fiscal policy to support the recovery by slowing the pace of its budget cuts. "With 10-year government bonds attracting yields of less than 2 per cent, the Government can finance additional investment in much-needed infrastructure at little cost," it said.

Yesterday the latest snapshot of the manufacturing sector showed the decline in activity moderated in April, helped by rising exports. The Markit/Cips index rose to 49.8, from 48.6 last month. Any reading under 50 signals a contraction.