So did we get it wrong? Did we try to talk America into a recession that is not going to happen? Washington redid the numbers yesterday and declared that the US economy grew by a very robust 3.3 per cent during the second quarter, compared with the initial 1.9 per cent estimate. Wall Street had been expecting about 2.7 per cent.

The big revision was mainly down to trade. Exports surged during the second quarter as the dollar hit record lows. Wall Street seized on the unexpected good economic news. Combined with a fall in the oil price it was enough to push the Dow Jones average up almost 2 per cent as traders bet that their inhouse economists have all been far too gloomy.

Sadly, there are few pleasant surprises awaiting Americans as they return from their summer vacations. Wall Street chose not to focus on the part of yesterday's data showing that the domestic economy is extremely weak.

Domestic demand over the second quarter rose by only 0.4 per cent despite the fat $168 billion tax rebate cheque from Washington posted to Americans in May and June. Stripping out foreign trade, the economy grew by a very feeble 0.2 per cent.

The dollar is now strengthening, which hurts the competitiveness of American goods, and the economies of its biggest trading partners, Britain and the eurozone, are slowing sharply.

While US jobless numbers yesterday were also lower than expected, 425,000 Americans are still losing their job a week. Of those economists on Wall Street who have managed to avoid the jobs cull, most are sticking to their original forecasts that more than 6 per cent of the workforce will be unemployed by Christmas.

The key remains the housing market. The S&P/Case-Shiller index - widely seen as the most authoritative measure of home prices - showed this week that the rate of price decline had slowed in the second quarter to 2.3 per cent.

But it is far too soon to be confident we are near the turn. Robert Shiller, the Yale University professor who is the index's co-founder, gave warning in April that price falls were likely to double before they recovered, exceeding the 30 per cent losses suffered during the Great Depression. Some fear they could overshoot as badly on the way down as they did on the way up. If they do, even the amazingly resilient US economy will be on its knees.

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