Later this week, the US economy’s slump into negative territory will be confirmed with the first reading for third quarter growth. It will be a dramatic late development for the Presidential and US Congressional elections next Wednesday, our time.

The Fed only has one issue to focus on: the credit crunch, the looming recession, and the US Federal Reserve’s reaction to it by a rate cut, and what happens in the various sectors of the financial markets. Although that sounds like several issues, in reality they are linked parts of the great unholy mess now destroying value here and around the world.

From cars to airlines, retailing, manufacturing, oil and resource companies, you name it, they are in the firing line or have been belted. In contrast, financial shares and groups are probably through the worst of their hammering, until we start getting a spate of corporate collapses triggered by the grinding pressures of a recession.

And of that’s not enough, a series of other figures on consumer spending, third quarter growth, new home sales and prices, plus consumer confidence will all be released and confirm the sorry state of the US economy.

Economists reckon the Fed will cut its Federal Funds rate by another 0.25% to 1.25% on the growing evidence that the US economy has entered a serious recession. US futures markets have fully priced in a rate cut of 0.50% this week, to 1%. (October’s employment report will be released next week with early estimates suggesting the number of jobless jumped 200,000 and the 6.1% unemployment rate last month rose.)

If that happens, the Fed funds rate would be back where it was in late June 2003, when it was at 1%, which was then the lowest in almost 40 years and signalled the then fear of deflation in the US as prices fell in the wake of the 2001-02 recession.

On top of the Fed decision there’s the first reading of the September quarter’s gross domestic product (growth figures).

It’s likely to show a significant fall in GDP signalling the start of a recession led by a slump in consumer spending. US growth contracted by around 0.2% (after being up 0.6% in the first two of the usual three readings) in the December quarter of 2007, but then bounced back in the first half of the year.

It’s very like GDP could have shrunk 0.50% in the quarter with retail sales and consumer credit all all falling sharply throughout the three months and industrial production tumbling.

The first reading only estimates the impact from the trade account, that will be released in a couple of weeks’ time and will be included in the second and third readings as more up to date information is released.

As well, figures for new US home sales, house prices, consumer confidence, personal income and consumption will all be released and are all likely to make depressing reading.

What happens to the US dollar and the yen if rates are cut will be interesting: conventional wisdom says that the rate cuts should force the US dollar and the yen to fall, but such is the fear in markets about other investments and currencies that both could withstand the cuts.

The latest update on the US economy will come less than a day before the US Fed cuts its key interest rate by either 0.25% or 0.50%, a reduction that will have absolutely no influence on the remorseless slide of the US economy.