WASHINGTON (MarketWatch) -- Few observers have ever seen anything like the economic data that will be released in the coming week, with the consumer price index and housing starts each expected to breach records dating back to the late 1940s.

With the global economy descending into a nasty recession, the October data could send a chill down the spine of policymakers, who are pulling out all the tricks in their tool kit to prevent a wider meltdown.

As everyone knows, this downturn began in the housing sector, with a global credit bubble inflating U.S. home prices, and homebuilders responding with a frenzy of construction. Now that the bubble has collapsed, everyone is looking to housing for any sign that the worst may be over.

Treasury Secretary Henry Paulson said last week that "market turmoil will not abate until the biggest part of the housing correction is behind us."

It's not behind us yet.

In October, credit markets essentially stopped working, which constrained potential home buyers' ability to find a mortgage. For home builders, it was the latest in a thousand cuts that have destroyed confidence about their industry.

Housing

After housing starts tumbled to a seasonally adjusted annual rate of 817,000 in September, the second-lowest level on record, economists surveyed by MarketWatch expect starts to fall to 776,000 in October, a post-war low that would knock out a record set in January 1991. The data are slated to be released Wednesday at 8:30 a.m. Eastern time. See Economic Calendar.

"It's natural to wonder how much more room they still have to go," wrote Meny Grauman, an economist for CIBC World Markets. "History and the natural rate of household formation would suggest that we are near the bottom of a two-year slide, but the outstanding stock of new homes and the overall health of the economy point to even further declines ahead."

The vacancy rate for homes typically occupied by their owner was at 2.8% in the third quarter, near the all-time record and almost twice as high as during normal times.

"Household formation has slowed noticeably as people losing their jobs or homes to foreclosures move in with relatives," wrote Brian Bethune and Nigel Gault, U.S. economists for IHS Global Insight. It's "one more obstacle that will prolong the downturn in housing starts."

"We expect builders to continue to cut construction through the middle of next year," wrote economists for Barclays Capital.

On Tuesday, the National Association of Home Builders is also scheduled to release its monthly survey of builder sentiment. The MarketWatch survey expects the index to remain at a record-low 14 in November, indicating that only about one in seven builders is optimistic about the market over the next six months.

Inflation vs. deflation

As the economic slump has spread around the globe, commodity prices have plummeted. The Federal Reserve no longer considers inflation to be much of a worry, and no wonder: The consumer price index is expected to fall 0.9% in October, the biggest one-month decline since the government began tracking the CPI in 1947.

The CPI figures are due out Wednesday.

Retail gasoline prices fell a record 17% in October as the global price for crude oil collapsed. Prices have continued to fall in November, signaling another big drop in the CPI.

After peaking at 5.5% in July, the year-over-year increase in the CPI will likely dip below 4% in October and go below 2% by the middle of next year, said CIBC's Grauman.

Core inflation -- which excludes food and energy prices -- is expected to rise 0.1% in October. On a year-over-year basis, the core CPI should moderate from 2.4% to 1.3% by the end of next year, said economists for UBS.

Output

Industrial production should show a modest rebound in October, recovering from the impact of hurricanes in September. The survey tips output rising 0.5% in October after plunging 2.8% in September. The data are to be released on Monday.

Refining and chemical output should bounce back, "but the rest of manufacturing remains in a headlong retreat," wrote Gault and Bethune. The survey from the Institute for Supply Management and the regional surveys suggest output is falling rapidly.

"The outlook for industrial production is worrisome as slower export activity due to a stronger U.S. dollar and slower global growth may limit improvement in the second half of 2008 and early 2009," wrote economists for Wachovia.