The only good news around seems to be coming from the Olympics.

The news bulletins on all economic fronts continue to be dire. There is no sign of light emerging anywhere around.

To repeat myself from previous columns, there is absolutely no indication current policies, within the current and prospective domestic and international environment, will bring about an early adjustment to our downward trajectory.

The latest UK GDP data sum up the state we are in. The first estimate for the second quarter of 2012 suggests a decline in output of as much as 0.7% – far worse than the consensus expectation of a 0.2% decline. The data for the previous two quarters had shown us to be in recession. The latest data show the recession continues and has deepened.

However, even these data are not sufficient to demonstrate the severity of this continuing recession.

UK output now remains some 5% below the pre-recession peak – and that is three years after we first thought that recession had come to an end. Indeed we are less than 3% above the trough to which we descended in 2009.

RBS economists have calculated that if this recession had followed a typical pattern our output would be a massive 13% higher than is now the case. Our output relative to the trough is even 7% below the equivalent level in the period post Great Depression.

Of course it is possible to come up with some suggestions as to why we should not read the worst into the data.

Yes, we did have an extra Bank Holiday in Q2 for the Queen's Jubilee. Yes the weather has been awful – even in the sunny south of England – but reference to these factors smacks of serious straw-clutching!

One factor explaining the past quarter's data was another dramatic decline in the construction sector.

Again I do not think that has any real validity as an excuse. Construction is so low because the public sector has cut back on infrastructure spend, while in the private sector all aspects of property are severely weak.

There is no joy to find in other sectors. Production – including manufacturing – declined slightly; now we have seen the Purchasing Managers Index for manufacturing in July at its lowest level since May 2009. That is disturbing, especially as both output and new orders have slumped of late.

In Q2 there was a positive contribution to output from – wait for it – government services. Amid all the talk of retrenchment and public sector austerity, spend on government services actually increased. The cutbacks in the public sector thus far have been focused on capital spend.

Given a continuation of present policies public current spend will fall away, adding to the downside risks to the economy as a whole.

The data for Scotland lag behind those for the UK, but we know that Scottish output declined for the final quarter of last year and the first quarter of this. We are in recession here and sadly I see no reason for us to buck the UK trend in the last quarter. Our figures are likely to be in line with those for the UK as a whole.

It is difficult to be optimistic about a return to growth in the third quarter. Gold and silver medals do not count in national output calculations.

There is evidence of neither any significant boost to retail and other consumer expenditure as a result of the London Olympics nor any dramatic addition to tourist activity. Generally it is very difficult to identify factors that will lead to recovery starting in Q3.

The public sector will not provide continuing momentum. International demand for our exports is sagging – as shown by the PMI results.

Construction remains in a depressed state and there is no reason why consumer spending should suddenly pick up.

I do so hope that I am wrong. I do hope that the UK will rapidly return to growth, with Scotland in the vanguard. But I do not expect to be proved wrong. Internationally the European Central Bank (understandably) continues to disappoint in failing to promise or commit to bond purchase, so market jitters remain the order of the day.

The US is decelerating, while politicians bicker over fiscal policy, threatening budget chaos. Even China is slowing and Indian activity must be being severely hurt by the sub- continent-wide power failures.

Domestically a cut in interest rates to 0.25% or even absolute zero would make no difference of any significance.

The new measures to boost lending to business will not work wonders, while the real problem is paucity of demand for business investment funds – because of lack of confidence in demand for products – rather than a shortage of competitively priced credit.

The cupboard of potential policy remedies is close to empty. Even more unconventional "quantitative easing" measures by the Bank of England are one possibility.

Fiscal measures including major commitments to additional and early infrastructure spend alongside temporary VAT reductions to boost consumer spend would be more likely to be effective but remain less likely to find political favour.

Sometime soon something has to give – please.

Jeremy Peat is director of The David Hume Institute