Year or more of pain as recession clouds roll in

Yet another day of grim economic news means only one thing - the hangover is getting worse.

But how bad is it going to get and when is it going to end? Pretty bad and not any time soon seems to be today's message.

First there was Bank of England Deputy Governor Charlie Bean, who is in little doubt it will "drag on for some considerable time yet".

Then there was Bovis Homes, Britain's fifth-biggest house builder, which warned the downturn in the housing market would continue "for the foreseeable future" because the mortgage market has dried up.

Figures from the British Bankers' Association showing mortgage approvals down 65% on a year ago back this up. Even the small increase in lending between June and July did little for the mood, with the BBA itself warning: "It would be premature to think that the housing market will now start to recover".

Disposable incomes are falling because of rising food, fuel and mortgage costs, and unemployment is beginning to tick up as the economy slows.

The City came back from the bank holiday in bleak mood today with the FTSE 100 index down more than 100 points at one stage and the pound sharply off against the dollar.

Put simply, the number of people not expecting a recession is shrinking by the day.

This makes it ever more likely the Bank will cut interest rates as soon as inflation has peaked. But even so, things are not going to get any better before the lending freeze thaws, particularly for housing.

With banks still nervous about losses in the credit markets, and fears mounting over another high-profile casualty in the US, 12 to 18 months' more pain looks likely, both in the financial sector and at home, where living standards will fall.