NIERSR’s monthly estimate of GDP suggests output grew by 0.4% in the three months ending in May after growth of 0.1% in the three months ending in Aptil.
The NIERSR said that the figures suggest the level of output is still almost 4% below its pre-recession peak and it does not expect the level of output to return to the pre-recession peak until early 2013.
Unlike the traditional definition of recession, the NIERSR defines “recession” to mean a period when output is falling or receding, while “depression” is a period when output is depressed below its previous peak. Thus, it believes that unless output turns down again, the recession is over, while the depression is likely to continue for some time.
NIESR claims its track record in producing early estimates of GDP suggests that its projection for the most recent three-month period has a standard error of 0.1-0.2% point when compared to the first estimate produced by the Office for National Statistics. This comparison can be made only for complete calendar quarters. Outside calendar quarters the figures are less reliable than this and they are also likely to be less accurate in the current disturbed economic circumstances.
Frank Eve, managing director of Frank Eve Consulting, said: “Even with the pound still being depressed against other currencies, which benefits manufacturing, it takes a long time for manufacturing to gear up to take advantage of that devaluation.
“The figures look correct and that probably means interest rates will be held at the current level for longer, and as a result of that it probably means there won’t be as much remortgage activity in the market as there would have been if interest rates were set to rise sooner.
“In regards to funding, it will take longer for lenders to get back to a situation where they can fund increased mortgage so for them it would be better if we were getting higher rates of growth, allowing the Bank of England to be more confident in raising interest rates.”
