Hopes that the UK recession ended in the second quarter were dealt a further blow today as one of the country's leading economic institutions forecast that GDP fell between April and June.

The National Institute of Economic and Social Research (NIESR) has calculated that GDP, which is a key measure of a country’s economic strength, dropped by 0.4 per cent in the three months to June, leading to the fifth consecutive quarter of economic decline.

Some analysts had predicted that GDP would stagnate or even rise slightly in the second quarter, but this is now looking increasingly unlikely.

Official data also emerged today showing that output by British factories unexpectedly fell in May, highlighting the continuing weakness of the economy.

Manufacturing output fell by 0.5 per cent in May, more than reversing small increases in March and April and confounding analysts' expectations of a 0.2 per cent rise.

April's figures were also revised down to show no change, after the initial figures showed a 0.2 per cent rise. Output fell by 12.7 per cent during the year.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The disappointing marked relapse in industrial production in May undermines hopes that the economy may have avoided contraction in the second quarter and offers a clear reminder that the economy is still in a very fragile state despite improving significantly from the lows seen in the first quarter,"

The wider measure of industrial production, which accounts for more than 17 per cent of the economy, also registered an unexpected fall, dropping by 0.6 per cent during the month.

Today's data is expected to fuel the Bank of England to expand its quantitative easing scheme on Thursday, when the Monetary Policy Committee will also announce its decision on the interest rate, which is at a historic low of 0.5 per cent.

The MPC has already pledged to inject £125 billion into the economy and is expected to extend this to the current limit of £150 billion in the coming months. However, the British Chambers of Commerce, which was the first to call the recession last year, said the Bank should increase the scheme to £200 billion to pull the country out of the slowdown.

Commenting on today's data, Vicky Redwood, UK economist at Capital Economics, said: "May’s industrial production figures suggest that the recovery in the manufacturing sector is a bit weaker than previous numbers might have suggested."

But she remained upbeat that GDP may still rise in the second quarter, adding: "The fall is still a big improvement on the 2 per cent to 3 per cent monthly falls seen at the end of last year. And industry still looks likely to post a much smaller fall in the second quarter overall than in first quarter – thus boosting quarterly GDP growth."

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