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However despite sluggish growth the National Institute of Economic and Social Research believes 2008 will be better than 2007 – and it is inflation that remains the real worry going forward.

The figures show that the growth rate in the three months ending June is 0.2% - that is an improvement on the figure of 0.1% for the three months ending in May. The figure may be misleading as it is accentuated by rounding up.

The Institute has factored into the figures the prediction that retail sales will fall back in line from their unexpected spike in May. Add to this an expected drop in public sector services their analysis of a gloomy economy is well founded, and it is hard to see how they see the economy as being more productive this year than it was last year.

Increasing the size of the economy will be particularly tough if interest rates are not eased. The Monetary Policy Committee (PMC) meets this Wednesday and Thursday to decide if they are to take any action. The problem for them is that while growth is a major concern the dangers posed by inflation are the real threat facing Britain in the final half of the year.

Oil prices are unrelenting and this has starting feeding through to producers who will now have to start passing on their costs. The PMC will therefore be caught in a difficult position that will in all probability see rates remaining steady for the near future.

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Related links

• NIESR GDP estimates