UK economy to grow slightly this quarter

By Jonathan Cable

LONDON (Reuters) - The economy will shrink more this year than previously thought but it will grow very modestly in the current quarter, sooner than was expected just a month ago, a Reuters poll found on Wednesday.

A median of around 40 economists in the survey, taken over the past week, showed the economy contracting by 4.1 percent this year as a whole, compared to 3.9 percent forecast last month, but is better than the 4.4 percent contraction forecast for the euro zone.

The economy is now expected to grow by just 0.1 percent in the third quarter, three months earlier than in a June poll, and will then witness 0.8 percent growth in 2010, revised up from the 0.5 percent predicted in June.

"A policy-induced, inventory-led rebound appears to be underway," said Andrew Brigden at Fathom Consulting, who has significantly revised up his forecasts since last month.

The Bank of England unveiled unprecedented plans earlier this year to purchase up to 150 billion pounds of government bonds, effectively printing money, to boost an economy in the throes of a deep recession.

However uncertainty remains with forecasts ranging from a 3.4 to 4.8 percent contraction for 2009 and between 0.7 percent contraction and 1.9 percent growth for 2010, slightly wider than in last month's poll.

Revised data at the end of June showed the British economy shrank 2.4 percent in the first three months of 2009 -- its fastest pace in more than 50 years -- and comes after a 0.7 percent expansion in 2008 and growth of 3.0 percent in 2007.

But economists say the worst may be past.