Hamish McRae: Any green shoots have failed to take root, so far

Analysis

We are not through this yet. The worst predictions for the economy in the third quarter were that it would be flat. Most people expected it to have grown a little, hence the headlines at the end of last month that the recession was over.

As it was, it seems that just about every bit of the economy was down, including the largest single element of it, private sector services. The green shoots of growth, such as they were, seem to have failed to take root.

What has happened inevitably invites comparison with previous recessions here and with what is happening abroad. Broadly speaking, we are experiencing as deep a recession as the worst post-war one, that of the early 1980s, and with these latest figures, one that has persisted a little longer even than that one. But in terms of its impact on unemployment it has been less damaging than then.

House prices have been more resilient than in the 1990s. And inflation having been relatively muted means continued lower interest rates, so preventing any recovery, when it comes, being snuffed out by higher rates. We are seeing something similar to that of the other large European economies in the fall from peak to trough but a somewhat steeper drop than in the US. In fact, we are moving a little behind most other countries. We went into recession a bit later but we are going to come out later too.

We don't have third-quarter figures for Europe or the US but it does look as both will show growth. That is troubling because it suggests UK policies have been less effective in stimulating the economy than the policies of most other large developed countries.

There are obvious political implications if the UK gains the tag of being the last major economy to escape recession, for no one wants a "last out" label. But the similarities between the main economies are greater than the differences, and if the rest of the developed world does sustain reasonable growth in the months ahead, the UK will be pulled along with it.

Read with the other data that has been emerging, a broad picture emerges of an economy that is bottoming out, though it has yet to do so, and one that will experience modest growth through 2010. Most forecasters have pencilled in a figure of about 1 per cent growth for next year. That is not only extremely low by recent standards but far too low to enable the government to make much progress on getting its own borrowing down. Both major parties plan to tighten policy from next year onwards and make have to do so against the background of a very sluggish economy. The slog ahead looks even more uphill.