Bank of England warns of fall in UK output

Bank of England governor Sir Mervyn King today warned that UK output may shrink again as the economy continues its “zig-zag” recovery.

Presenting the Bank’s quarterly inflation report, Sir Mervyn said GDP could decline in the final three months of this year after a return to growth in the third quarter gave an “overly optimistic impression”.

The Bank downgraded its growth forecast for 2013 to around 1% as it warned output will remain below pre-financial crisis levels for the next three years.

It also revised its inflation forecast, with the rate expected to fall towards the 2% target in the second half of next year, later than previously thought.