Outgoing Bank of England governor Mervyn King has warned GDP growth in the fourth quarter is likely to drop back, after the UK exited recession during the third quarter of the year.
In his opening remarks to the November inflation report, King claimed growth during the third quarter had been boosted by one-off factors.
He says: “Continuing the recent zig-zag pattern, output growth is likely to fall back sharply in the fourth quarter as the boos from the Olympics in the summer is reversed – indeed output may shrank a little this quarter.”
The inflation report claimed growth in the third quarter was exaggerated by temporary factors.
The report has suggested a “sustained, but slow, recovery over the next three years”, reflecting “unfavourable” conditions in the global economy.
Inflation – which rose to 2.7 per cent in October – is not expected to reach the government’s target of 2 per cent until the second half of next year.
King adds: “The immediate economic outlook remains a challenging one. Growth is likely to remain sluggish and inflation above target.
“The path to recovery will be long and winding. But there are good reasons to suppose that we are travelling in the right direction.”