So what happened to Britain's recovery?
WHAT went wrong? At the start of the year it was widely hoped that the UK economy would move decisively into a self-sustaining recovery, which would be good for stock market investments. It hasn't happened, and all signals are currently pointing to the recovery taking longer than envisaged.
After the traumas of the previous three years, many expected a return to growth in 2011, with the economy expanding by around 2 to 2.5 per cent.
Instead, the economy has, in effect, stagnated over the first six months of the year. This has triggered renewed talk about the need for a "Plan B", either further policy stimulus or, at the very least, some dilution of the austerity measures.
Such speculation would reach a crescendo if, as some forecasters predict, the economy actually slows further in the second quarter, or does so in the second half of this year. Whether that comes to pass or not, what is clear is that GDP growth this year will fall far short of those earlier expectations. Why? And what is the outlook for coming months?
Part of the explanation must lie in the eruption of political agitation in North Africa and the Middle East, which led to a sharp rise in oil prices. Rising energy costs due to strong demand is one thing, rising power bills due to supply-side factors is another.
Another part of the explanation was the natural disaster in Japan in March. Although the biggest impact was on the domestic economy, there was also a global dimension: Japan is the sole supplier of many key products so, when their output was disrupted, the effect was felt worldwide.
On top of all this, the uncertainty surrounding the serious debt crisis in Europe has left investors nervous, with some predicting a "double-dip" recession and second stock market crash.
The good news is that while it is difficult to assess accurately the combined impact of these global "shocks", it does seem likely that their impact will prove to be transitory.
Less reassuring is the fact that homegrown explanations for the growth disappointments this year look rather less transitory. Several key areas of the economy are just not back to normal, and seem likely to remain that way in the near term: these include the consumer and the labour, housing and credit markets.
The consumer is the main driver of growth, but was perhaps too aggressive a driver in the years up to 2008. Taking advantage of overly easy bank lending practices and a buoyant housing market, households ramped up their spending power.
When the banking turmoil struck, the financial climate got distinctly chillier, and reducing debts became the main focus for both borrowers and lenders. Households have cut back on loan applications, while close to 70 billion of mortgages have been repaid since the recession began. Confidence remains at levels far from "normal", inconsistent with any imminent pick-up in spending.
Part of the explanation also lies with the soft labour market. It is true that unemployment levels have so far defied the doomsters, who forecast a rise to three million and higher. The actual number has held relatively steady at around 2.5 million since 2009.
However, that steadiness came at a price, with wage bargainers prepared to trade job security for wage increases. But it has not just been a case of wage flexibility; there has also been a willingness to accept, often reluctantly, part-time employment.
As a consequence, households have been squeezed. Wage growth of 2 per cent has confronted an inflation rate of more than 5 per cent on the RPI measure. Negative real income growth will keep spending power constrained, unless and until headline inflation falls back sharply.
Excesses in the housing market too were a function of the pre-crisis largesse of the lending institutions, which helped drive house prices into super-expensive territory. The days of 100 per cent mortgages are now long gone, replaced by hefty deposit requirements. Home-ownership, especially for first-time buyers, is a much more difficult option.
Consequently the market has stagnated, with prices still expensive in historical terms. Given labour market conditions and the state of consumer confidence, a sharp imminent recovery in the housing market seems unlikely.
A self-sustaining economic recovery is usually associated with a credit market in which there is a willingness on the part of both borrowers and lenders to do business. For the present, the overriding desire to reduce borrowing continues to dominate, with lenders reluctant to grow their books too aggressively and borrowers trying to get their balance sheets into a more manageable shape. Time is a great healer but, as the recent stress tests showed, the banks are not there yet.
Although there is little likelihood of a sharp near-term improvement in economic fortunes, the outlook for investors is not all doom and gloom. The transitory "headwinds" are likely to pass. The Japanese economy will get back on its feet and supply chains will be re-established.
As for the oil price, the supply shock may remain, but slower global economic growth is introducing a counterbalancing demand impact. Importantly, if European policymakers do manage to contain debt problems in Europe, and economic growth there remains solid into 2012, that would be helpful for an important element of UK manufacturing and business services. Europe remains by far our largest trading partner.
Looking at the domestic factors, the deleveraging that has already been achieved is painful but will make the whole system more resilient going forward. All in all, we do not expect a strong recovery over the remainder of this year - or next - but equally we do not expect a slide back into a major recession.
• Douglas Roberts is senior international economist at Standard Life Investments