By Jonathan Davies

Economic growth in the UK is set to slow down in the third quarter, according to the National Institute of Economic and Social Research (NIESR).

In its latest report, the think-tank forecast economic growth to be 0.4% in the July-September quarter, half of its original 0.8% forecast.

It comes after data released this week that showed the manufacturing and construction sectors grew slowly in July.

Despite its revision for the third quarter, NIESR still expects the economy to grow by 2.5% over the year.
NIESR said it was generally upbeat over the state and future of the British economy, but stressed that the productivity puzzle has the potential to seriously damage growth.

The think-tank added that it expects inflation to stay at around 0% for the rest of 2015, but forecast a return to the Bank of England’s target of 2% by 2017. It also expects the Bank of England to start raising interest rates in February 2016.