The journey for the US

The future of the US economy hinges on whether the $2 trillion of fiscal stimulus packages work. If so, this is the path we expect the US to take:

The last quarter, in which the US economy shrank by 6.2 per cent, will have been the bottom of the recession. In the current quarter the US economy will shrink by 5.8 per cent and by the end of December the US should be out of the recession.

Unemployment, however, which stands at 8.1 per cent, is expected to continue to rise until the end of 2010 at least, while the housing slump isn’t even at the halfway stage yet. House prices, on average, have lost about a quarter of their value.

The journey for the UK

Even if Alistair Darling fixes the banks and gets credit flowing, this is the horror we face:

We will be in a recession until the fourth quarter of 2010.

Tomorrow, we are likely to be told that the number of unemployed has hit 6.3 per cent of the British workforce — about two million. This is expected to peak at 11.5 per cent (3.5 million) by the middle of 2010.

The cost of bailing out the economy and the banks is likely to plunge us into a national debt that equals 15 per cent of GDP, the highest in Europe. A late exit from the fiscal stimulus packages risks triggering 10 per cent inflation.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

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