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There is no doubt, however, that times should be getting much tougher for consumers and retailers and will do so over the second half. The squeeze is on.

The way the PMIs work is that levels below 50 indicate a sector is contracting. With manufacturing, construction and services all below the 50 level in June, that suggests the recession started last month. In practice, the read-across is not quite so neat and the survey levels for manufacturing and services are probably consistent with snail’s pace growth rather than recession, but the warning signs are there.

Each month the Treasury asks independent economic forecasters to submit their predictions for the economy. The latest average, compiled a couple of weeks ago, was 1.7% growth for this year, 1.4% next.

Only one forecaster, Peter Warburton of the consultancy Economic Perspectives (and the shadow monetary policy committee, see item at end), predicts outright recession. In his view, growth this year will slow to 0.7% and the economy will contract by 1.9% next year.

He is, as I say, on his own but more economists are starting to talk about “technical” recession — two consecutive quarters of declining GDP. For most individuals, and people in business, all this is a decimal point too far. What matters is how weak it feels and the consensus among economists is that 2008 and 2009 will be the two weakest years since the last recession.

The question is whether “weak” captures it properly. If the credit crunch can bite so savagely in one area — housing — what will be its effect on the wider economy? If consumer confidence is plumbing new depths now, what will it be like if unemployment jumps and home repossessions soar?

The combination of the credit crunch and soaring oil prices is a horrible one, two big economic shocks in one. The crunch is biting harder, according to the latest credit-conditions survey from the Bank of England, while declining oil use in America is not enough to deter the oil bulls from pushing prices to new daily highs.

Last week the Basel-based Bank for International Settlements (BIS), the central bankers’ bank, gave a pretty scary assessment of the outlook for all the advanced economies, including Britain. We could be on the brink of a “much greater and longer-lasting” downturn than people are assuming, it warned, so much so that the problem central banks could be facing in a few years could be deflation — falling prices — rather than inflation.

We know about deflation from Japan’s experience over the past two decades and from the 1930s. The BIS says such an outcome is “unlikely” but “cannot be ruled out entirely”. Let’s hope it stays unlikely.

PS: What should the Bank of England do this week? The “shadow” monetary policy committee is clear; it should not raise rates. Eight members of the SMPC, which meets under the auspices of the Institute of Economic Affairs, think Bank rate should stay on hold. One, Patrick Minford, votes for a quarter-point cut.

Overwhelmingly, the shadow committee is more concerned about the downturn and the sharp deceleration in money-supply growth than inflation. Six of those who voted to hold this time have a “bias” to cut rates in coming months. They think the commodity price boom will come and go but the effects of the credit crunch are here to stay.

In contrast, two SMPC members have a bias to raise rates to anchor inflation expectations, which have been rising. The shadow committee’s deliberations (available in full on my website, economicsuk.com) are always interesting. What makes them particularly so this time is that this is not a group of people who could ever be described as being soft on inflation. Yet they are troubled by the danger signs. Roger Bootle said: “We could be facing an economic crisis and a financial collapse.” Tim Congdon commented: “I’ve been surprised by how bad conditions have become and how quickly they’ve changed.” And Peter Warburton said: “Events of the past year have fired Exocet missiles at received wisdom about the UK and its policy framework.”

The SMPC’s verdict is probably quite helpful for the Bank. Certainly it suggests this is no time to be thinking about higher interest rates.

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