The UK economy contracted by 0.7% between April and June, a significant improvement on the 2.4% fall in the first three months of the year.
Mervyn King, Bank of England governor said the economy was growing again but said the strength and sustainability of the recovery was still highly uncertain.
King’s comments follow figures which show inflation has fallen to its lowest level since February 2005.
The Consumer Prices Index (CPI) dropped to an annual rate of 1.6% in August from 1.8% in July.
But the Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments and housing costs, rose, to -1.3% from -1.4%.
Some analysts predict the economy will return to growth in the current quarter spelling an end to the recession. However, many have said the recovery will be weak with rising unemployment.
The European Commission has forecast the UK economy to grow by 0.2% between July and September, which is less than France, Germany and Japan which have already broken free of the recession.