Blanchflower, who steps down from the bank's Monetary Policy Committee at the end of next month, said there were still "tough times ahead" as Chancellor Alistair Darling predicted the economy would shrink by 3.5 percent this year.

Darling, who presented his budget to parliament on Wednesday, forecast a return to growth by 2011 at a rate of 3.5 percent.

"There have been some tentative signs of possible turnaround in the UK economy, but these are early days," Blanchflower wrote in an article for the Guardian internet site.

While recent market indicators have shown more positive signs, Blanchflower tempered his remarks by saying all of them were still at "very low levels" and Britain was still deep in recession.

Blanchflower said there were indications of a pick-up in the housing market with price declines slowing and mortgage lending on the rise.

Consumer confidence had improved "a little," although this was probably down to interest rate cuts that had helped people on variable-rate mortgages, and there were still worries that "they save this money for a rainy day rather than spend it on the high street," he said.

Elsewhere, the indices for manufacturing activity rose in March and retail sales and car registrations were also marginally better.

"It should, however, be said that all of these various indicators still remain at very low levels. The big question is when, and how quickly, will recovery come," Blanchflower said.

"We are still deep in recession. My worry, then, is that this is a false dawn. Most growth forecasts look optimistic. There is much still to do. There are tough times ahead."

Blanchflower also criticised Darling's measures to help the unemployed on the day total unemployment jumped by 177,000 in the three months to February, the biggest rise since 1991.

That took the level to 2.1 million, the highest since Labour's landslide election win in 1997. Blanchflower had called for a fiscal stimulus targeting job creation and said there was "disappointingly little" to offer the new unemployed.

Darling announced he was pumping in an extra 1.7 billion pounds to help the unemployed, pledging that those under 25 who have been out of work for a year would be offered a job or a place in training.

"The labour market is loosening fast and we should expect many more months of rising unemployment. The worst is far from over for ordinary working people," Blanchflower said.

"This was a budget that was always going to disappoint those of us calling for a big fiscal stimulus targeted on jobs. However, there were tantalising morsels, including job guarantees to help the young unemployed and increases in the number of places in sixth forms and further education."

(Reporting by Frank Prenesti. Editing by Chizu Nomiyama)