The economy will enjoy an "Indian summer" as falling inflation helps hard-pressed households, despite failing to grow in the second quarter of 2012, according to a respected forecaster.

The Ernst & Young Item Club believes the extra bank holiday for the Queen's Diamond Jubilee helped keep the economy in its double-dip recession in the last quarter, capping a "dismal" first half in which confidence was hit by the eurozone debt crisis.

But it predicts a return to growth in the current quarter, as faster-than-expected falls in inflation give consumers more money to spend on the high street, while the Olympics will provide a further boost.