A crucial week ahead, not only for Australia with both interest rates and growth here expected to fall, but in Europe, Britain, Canada and the US.

While the Reserve Bank of Australia and the Bank of Canada are expected to cut interest rates next week, the Bank of England and the European Central Bank are unlikely to, even though growth has stalled in the UK and is contracting in the Eurozone.

Our rates are going to fall by at least 0.25%, with the RBA making clear another 0.25% will follow. Second quarter growth figures are out Wednesday.

The US economy grew at an annualised rate of 3.3% in the second quarter — faster than previously estimated by the government and a stronger upward revision compared with economists’ forecasts.

A combination of surging exports, declining imports, improved consumer spending figures and a less aggressive drawdown in business inventories helped drive up the growth rate figure from its sluggish base of 0.9% in the first quarter.

In late July, the US government had estimated that gross domestic product had risen at an annualised rate of 1.9% in the second quarter. Economists were expecting that rate to rise to 2.7% on Thursday.

The expansion is likely to weaken in the second half as consumers burdened with falling home values and dwindling job prospects rein in spending. Separate figures today showed the number of Americans collecting unemployment benefits reached a five-year high last week.

The US Labor Department said initial jobless claims dropped to 425,000 last week, from 435,000 the previous week. That’s still above the 321,000 average of last year. The number of people staying on unemployment rolls rose to 3.423 million, the highest since November 2003.

The smallest trade deficit in eight years was the biggest contributor to growth last quarter. The trade gap narrowed to a $376.6 billion annual pace and added 3.1% points to growth, the most since 1980.

A better idea of just how miserable the US economy really is can be seen from the following: excluding trade, the economy would have grown at a 0.2% rate after growing 0.1% in the first three months of the year. That’s all but in recession.

Economists say the slump in imports into the US because of lower demand, will be matched in Europe, Japan and parts of Asia from now on as those areas slow, meaning the favourable trade boost won’t be as strong and could even disappear, leaving the domestic economy stagnating.

On the negative side, the contraction in the residential real estate market was more rapid than previously estimated. Housing activity declined at a pace of 15.7%. Further figures out overnight in Britain showed the drop in house prices has accelerated with one of the biggest year on year falls recorded in the UK in the last 18 years.

The survey by the Nationwide Building Society showed that the price of a typical house fell 1.9% in August to push the annual fall to 10.5%. The survey said it was the first time a year-on-year fall in prices had entered double digits since Nationwide started the survey in 1991. It supported last week’s survey by rival Halifax, which showed an 11% fall. UK home mortgage sales are down sharply as well and show no sign of stabilising.

And yet the Bank of England is considered unlikely to cut rates at next week’s meeting.

The European central bank is also considered unlikely to cut, even though the economy in the 15 country Eurozone (plus outliers like Denmark) contracted in the second quarter. That’s despite hints from Germany that inflation there had peaked and was easing. In fact one senior ECB member warned that a hike in rates might be necessary when growth resumed expanding.

The ECB raised its main interest rate to 4.25% in July.

But the important figures will be the August employment report on Friday of next week from the US. It’s expected to be bad, possibly the worst this year so far with early forecasts putting job losses at 70,000 or more, and the unemployment rate up to 6%.

Many US economists believe that a bad figure will completely offset the seemingly good news from the second quarter growth figures and send a strong signal that the economy will slide lower this half, with another tough fourth quarter, like there was at the end of 2007.

And here’s another important indicator about 2009 from car giant, Toyota.

It has just cut its 2009 production forecast by nearly 7% or 700,000 vehicles yesterday, a month after cutting its 2008 forecast.

The world’s second biggest car company (but the biggest by sales and profit) now says that it expects to make 9.7 million vehicles around the world in 2009, down from its first estimate of 10.4 million and compared to the lower 2008 estimate of 9.5 million.

The company chopped 300,000 vehicles from its US forecast and 150,000 each from Japan, Asia and Europe. The cut is equal to 70% of Australia’s annual car sales, or around twice our local yearly production.

It blamed the slump in the US brought on by high oil prices and the slowing economy, credit crunch and subprime mess which is now infecting car leases and car loans.

Like GM and Ford, Toyota now says there has been a “structural change” in US demand thanks to the high cost of petrol which is forcing buyers to abandon sports utility vehicles (SUVs) and pick up trucks in favour of smaller, more fuel efficient petrol, diesel and hybrid vehicles.

Toyota says it will not advance plans for a “plug-in” petrol-electric hybrid (a plug in version of the Camry or Prius hybrid?) and offer it to corporate fleet customers by the end of next year.

Toyota has abandoned its long held ambition of being the first carmaker to sell 10 million vehicles in a single year: it now hopes to do that in 2010, but that would need a significant lift in demand in the US.

High prices for steel and other raw materials have forced Toyota to announce its first increase in Japanese domestic vehicle prices in 16 years, though it limited the rises to commercial trucks and vans and hybrid models.

The core of the problem for the giant car group is its decision last year to launch a full-size pickup, the Tundra, in the US to go after the slice of the market dominated by Ford, GM and Chrysler.

The surge in petrol prices has seen sales of trucks fall 25% this year in the US and 30% for large SUVs. BMW and Mercedes are also suffering in the US, especially on their leases for their luxury class vehicles.