03/08/2011 19:32 BST | Updated 03/10/2011 06:12 BST

Economic Experts' Gloom Over 'Missed' Growth Forecast

PRESS ASSOCIATION -- Chancellor George Osborne has faced fresh pressure over the pace of economic recovery when the head of the UK's tax and spending watchdog conceded that experts expected its growth forecasts for this year to be missed.

Robert Chote, who chairs the independent Office for Budget Responsibility (OBR), told The Independent that there "aren't many people" expecting annual growth to reach the 1.7% it anticipated in March.

GDP increased by a lacklustre 0.2% in the second quarter of 2011 after consumers reined in spending as their pay failed to keep pace with the rising cost of living.

Fears were further heightened by a survey which showed the manufacturing sector - the main driver of growth in recent months - contracted in July for the first time in two years.

The National Institute of Economic and Social Research (NIESR) think-tank on Wednesday became the latest of a string of economic bodies to further downgrade its growth forecast -dropping it from 1.4% to 1.3%.

Shadow chancellor Ed Balls has recently criticised the Government for cutting too far, too fast and has called for VAT to be reduced back to 17.5% as part of a "Plan B". But the Treasury insisted its measures were "essential for sustainable growth" and are creating jobs.

In an interview with the newspaper, Mr Chote said: "Back in March our central forecast was for 1.7% growth this year, which at the time was fractionally more pessimistic than the average of the outside forecasters. Since then obviously we've had weaker out-turns in the first and second quarters than most people, including us, anticipated.

"For the second quarter the ONS (Office for National Statistics) explained a variety of one-off factors that contributed to that. As a simple matter of arithmetic, in order to get to 1.7% now you'd be looking for quarter-on-quarter growth rates of 1% in the second and third quarters of 2011, and there aren't many people out there expecting that."

The OBR is not due to make another formal forecast until one to coincide with the Chancellor's Autumn Statement.

A Treasury spokesman said: "The economy is growing and creating jobs. The service sector has been showing continual growth and July's figures showed its strongest level for four months. The difficult decisions the Government has taken to reduce the deficit is essential for sustainable growth."