Economy to stay flat in April

Economic growth was flat in April but could decline next month, according to a forecast from a research group.

The National Institute of Economic and Social Research (NIESR) has estimated the GDP (gross domestic product) growth rate for the three months ending in April is 0.4 per cent, after 0.4 per cent in the three months to March.

The results for both three-month periods are boosted by buoyant figures for February, making it possible that slower growth could emerge in the three months ending in May, the report added.

"The Bank of England is obviously concerned about inflation because a failure to keep inflationary expectations in check would be very damaging," the NIESR said in its report.

"Nevertheless, there is a case for a quarter-point reduction in the interest rate this month based on the prospect of slower economic growth."

The gross domestic product is the total value of goods a country produces over a period of time and is a measure of the economy.

The official results for the UK's GDP, released in April, showed a slowdown to 0.4 per cent growth in the first quarter of 2008, compared with 0.6 per cent in the previous quarter.

The official figures affect the decision of the Bank of England's monetary policy committee (MPC), which is meeting today to set the base rate for the month.

Last month, the interest rate was cut by 0.25 per cent to five per cent due to a slowdown in economic growth as the credit crunch continued to squeeze finances and concerns grew over a sluggish housing market.

However, members of the central bank's MPC were split on the decision, with two expressing their wishes to leave the rate as it was and one calling for a bigger cut.

The bank's governor, Mervyn King, has urged a calm approach to the volatile markets and asked banks to carry on business as normal to get back on track.

Analysts believe the rate may stay the same this month, but fall again in May in response to a declining GDP.

Sarah Routledge

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