The NIESR said gross domestic product in the three months to the end of November was 0.2% higher than GDP in the three months to the end of August, having fallen by 0.3% in the three months to October.
The respected think-tank said “it seems likely” that growth picked up further in December. If that were to be the case, the economy would likely expand in the fourth quarter, having contracted in the previous six quarters.
The NIESR’s estimate came out as Chancellor of the Exchequer Alistair Darling prepared to present his pre-Budget Report today.
Darling is expected to stick to his March prediction that the economy will grow by 1% to 1.5% in 2010, and not take any dramatic steps to cut the government’s huge budget deficit, for fear of prolonging the recession.
Meanwhile, struggling manufacturers cast further doubts over the strength of the recovery after official figures showed output stagnating in October.
The lack of growth disappointed expectations of a modest rise, while wider industrial output including mining and utilities was also flat over the month.
Overall industrial production, which includes mining, quarrying, utilities, oil and gas, and accounts for 17% of the economy, was unchanged on the month and dropped 8.4% from a year earlier, the Office for National Statistics said.
Production fell 0.9% in the third quarter, revised down from a 0.8% drop. The revision will have a “negative” effect on the gross domestic product estimate for the quarter, officials said.
September’s bounce back from a 2% fall in manufacturing output during August was also revised down to 1.5% by the ONS.
The UK economy contracted 0.3% in the three months through September, the sixth quarter of contraction.
IHS Global Insight’s Howard Archer said: “This highlights the fact that the UK still faces a difficult battle to develop a sustainable, significant recovery.”
The figures showed rises for chemicals, machinery and equipment firms cancelled out by falling output among electrical manufacturers as well as printing and publishing firms.
Meanwhile, a CBI report added to the gloom surrounding the economy.
The Confederation of British Industry said a fourth of manufacturers polled in a survey expect output to fall over the next three months, more than the 18% who expect to step up production.
Ian McCafferty, the CBI’s chief economic adviser, said demand was improving only slowly and that order books remained weak.
“This highlights the fragility of the recovery and the likelihood that economic activity will continue to bump along the bottom early next year,” McCafferty said.
Uncertainty over manufacturing prospects has also been seen in recent survey data, with the Chartered Institute of Purchasing & Supply’s closely-watched activity index signalling slowing growth in November.
The bad news on manufacturing follows hot on the heels of a British Retail Consortium report showing that retail sales growth was only 1.8% higher in November than November last year, which was in any case depressed as the maelstrom of the financial crisis was at its height.
In a separate report, the Halifax financial group said house prices rose for the fifth month in a row during November as the market continued to be boosted by a shortage of homes for sale.
The average cost of a home rose by 1.4% during the month to stand at £167,664, the highest level since October 2008, the Halifax stated.
But it warned that the prospects for the market going forward depended on the state of the economy and whether there was a significant increase in the number of homes put up for sale.
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