UK's NIESR estimates economy grew 0.7 percent in second quarter

LONDON (Reuters) - Britain's economy picked up speed in the second quarter after a slow start to the year, forecasters at the National Institute for Economic and Social Research said on Tuesday.

NIESR said it estimated that gross domestic product in the three months to June was 0.7 percent higher than in the previous three-month period, up from 0.6 percent in the three months to May. In annual terms, growth was 2.7 percent, it said.

"This robust rate of growth exceeds that of the economy’s potential over the same period, and so suggests spare capacity continues to be absorbed," NIESR said.

"Consistent with this, we expect the Bank of England to begin increasing Bank Rate in early 2016, most likely coinciding with the February Inflation Report," it said.

"Of course, risks to this outlook persist, not least the ongoing Euro Area saga."

Britain's economy grew by 0.4 percent in the first three months of 2015.

Data earlier on Tuesday showed stronger-than-expected industrial output for May, thanks in large part to oil and gas production, but manufacturing output fell in the month.

(Reporting by William Schomberg; Editing by Hugh Lawson)