A senior official of the US Federal Reserve once likened conducting monetary policy to driving a car with the windscreen blacked out and having only the rear-view mirror for directional guidance.

All right, as an analogy it required an implausible amount of imagination to make it work, but you get the message he was trying to convey. Central bankers are hampered in their policy decision-making by a distinct lack of timely information about the future and a not necessarily helpful abundance of information about the past.

For all the advances of the information revolution, the speed with which we get news and data about the world, this simple challenge for economic policy hasn’t really changed. We still don’t have a good concurrent sense of where the economy is and rely, instead, on data that may already be out of date by the time we get it. Almost all the statistics that the Fed and the Bank of England rely on for their policy decisions are, at best, a month old. They then frequently get revised in subsequent months. Bill Clinton was elected president in 1992 promising to lift the economy out of a recession that actually had ended 18 months earlier.

The body in the United States semi-officially charged with dating business cycles, the National Bureau of Economic Research (NBER), declared that the last recession had begun in the very month that it ended - November 2001. Subsequent revisions to that data suggested that recession probably began in late 2000.

Most economists in the financial sector are still forecasting that the US will avoid recession this year. A significant minority believe that there will be a recession. But, anxious to get ahead of the curve of outdated economic information, a rising number of economists now say that the US may already have entered a recession at the end of last year. In Washington, there is a flurry of activity on all fronts - monetary and fiscal - predicated to some extent on the possibility that a recession has already started.

Has it? By the definition used by the NBER - a measure that combines employment, industrial production, income and retail sales - the picture is mixed, but the economy certainly ended 2007 in a precarious state.

In December the labour market did add jobs, but only 18,000. These numbers are especially prone to revision and the December figure is close enough to zero that any downward revision might well tell us that the economy ended last year with a contraction in total jobs. In any case, it is well below the level of job growth needed to keep pace with labour force expansion. That was reflected in the fact that the unemployment rate shot up by 0.3 percentage points to 5 per cent. The last time the jobless figure rose that much in a month was during the 2001 recession.

The latest data we have for industrial production showed a small increase in November – but looking back a little further we get a negative number. Output in November was 0.5 per cent below where it was in September. The income story was also gloomy at the end of the year. Personal disposable income rose in nominal terms in the three months to November, but it declined in inflation-adjusted terms by 0.4 per cent between September and November.

The only really solidly positive variable in the final few months of last year was consumer spending. Retail sales rose by a sprightly 6 per cent from a year earlier in November (not adjusted for inflation). That figure, though, may have been artificially boosted by the very early Thanksgiving last year, which pushed much of the usual December Christmas spending into late November.

This week we will get perhaps our strongest indications yet as to whether a recession might already be under way. The retail sales figures for December will be published today. If the consensus estimate of Wall Street economists is correct, sales could easily have been flat or even negative last month.

Tomorrow the Fed will publish the December numbers for industrial production. The survey of purchasing managers for last month already published two weeks ago suggested that December was a very weak one for manufacturers. That might push overall industrial production for the last few months of the year deeper into negative territory.

If those two sets of reports are as bleak as the ones we have seen in the first two weeks of the new year, then the chances are quite good that overall economic activity at the end of last year was sliding.

One caveat, of course. That does not necessarily imply a recession. It is just possible that the economy may have dipped in late 2007, but could bounce back in early 2008. A month or three of weakness is not enough to qualify as a full recession. But that seems unlikely. The pace of demand is usually driven by momentum – once it is headed down, it is likely to stay down, at least for a while.

That suggests a high probability that some day, some way hence, officials will determine that the US actually went into recession late last year. The good news is that, if the past is any guide, it will already be over by the time Washington’s efforts to avert it take effect.

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