We should see the first annual fall in retail prices since 1960. Economists expect RPI inflation to turn negative in the February figures, reported in March. By September it could be as low as minus 2 per cent. That would be the biggest annual drop since 1933.
Of course, it's not just prices that will fall. So will real economic activity. As a result, it's possible that national income, measured in money terms, will show the first year-on-year fall since 1933.
In response to this, the Bank of England is expected to cut Bank Rate yet again, taking the rate down to its lowest since the Bank was created in 1694. Few economists are ruling out the possibility that the rate could even drop to zero.
Brown will beat Heath and Major
There's one record, though, that economists don't expect to be broken - that of the most severe recession. In fact, they expect this to be a relatively mild downturn. The consensus forecast is for real GDP to fall 0.9 per cent next year. This would mean the recession is milder than in 1991 (when GDP fell 1.4 per cent), 1980 (2.1 per cent) or 1974 (1.3 per cent). Even the most pessimistic forecaster only expects next year to equal 1980's fall.
One reason for this relative optimism is that most economists expect the recession to end next year. The Bank of England, for example, thinks real GDP will stop falling in the third quarter, and begin to rise in the fourth.
But banking crisis will go on
Such optimism is not because economists generally expect looser fiscal policy to boost the economy.
Nor even is it because they expect the banking crisis to end. Futures markets expect the gap between three month Libor and the overnight indexed swap rate (a risk-free rate) to fall to around one percentage point by next summer. Although this would be less than half the current spread, it would still be much higher than the spreads that existed before the crisis began in August 2007. Most likely, rising bad debts caused by falling house prices and rising company failures will cause banks to remain reluctant (or unable) to lend.
Instead, there's a more mundane reason to expect output to stop falling - the inventory cycle.
Output is falling now around the world because firms, desperate to raise cash or cut their overdrafts, are slashing their stocks of parts or unsold goods. Such cuts, though, are usually sharp but short. "Once inventories have corrected" says Morgan Stanley's Joachim Fels, "there is likely to be a sharp snapback in manufacturing output."
Although the UK has but a small manufacturing "base", it could benefit from this because the weak pound makes what exporting industry we have unusually competitive.
But of course, inventory building and exporting are minority activities. So even if the recovery does come as expected, it might not feel like much of one.
It won't feel like recovery
In fact, in one salient regard, there probably won't be a recovery at all in 2009. The lesson of previous house price falls is that they take a long time to work through. It's quite likely that rising unemployment, increased supply of properties as repossessions come onto the market, and banks' reluctance to lend could all cause prices to fall throughout next year.
So, will a "feel-bad recovery" be enough to support share prices?
One reason to think so is that there has in recent years been a strong correlation between annual changes in US industrial production and in the All-share index. So anything that improves US output, even the mere technicality of the inventory cycle, should improve equity returns.
Sadly, though, one lesson we've learned this year is that many stable relationships can suddenly break down.
