Economy grew just 0.1 percent in Q2 - NIESR thinktank

Pedestrians walk along Oxford Street in central London May 27, 2011.

LONDON (Reuters) - The economic growth slowed to just 0.1 percent in the second quarter of this year, a leading thinktank said on Thursday, suggesting the recovery has all but ground to a halt.

The National Institute of Economic and Social Research, whose former head Martin Weale sits on the Bank of England's Monetary Policy Committee, acknowledged that several one-off events had depressed output over the period.

But it said that even without these factors -- which include an extra public holiday to celebrate the royal wedding, and supply disruption after Japan's devastating March earthquake and tsunami -- momentum was weak.

"These figures do not provide a picture of economic growth that would support a tightening of monetary policy at this juncture," it said.

Purchasing managers' surveys earlier this week suggested the economy had expanded by 0.3 percent in the second quarter at best. If NIESR's weaker estimate is borne out by official figures it might tempt more Bank policymakers to vote for additional monetary stimulus.

The economy grew by 0.5 percent in the first three months of the year, a disappointing reading after a contraction of similar magnitude in the final quarter of 2010.

NIESR reckons its estimates of GDP are usually within 0.1-0.2 percentage points of the Office for National Statistics' subsequent preliminary figures.

The Bank has kept its key interest rate at a record low of 0.5 percent for more than two years. In recent weeks the monetary policy debate has swung from the timing of a rate rise to whether more stimulus may be needed.

Money markets are not pricing in a rate rise until 2012 and show a small but growing chance the BoE will resume asset purchases through its quantitative easing programme.

(Reporting by Christina Fincher; Editing by Catherine Evans)