With the federal political parties locked in a bitter power struggle and a national economy teetering on the brink of a recession, experts are predicting the year ahead will be like one great big roller-coaster ride.

And the dizziest part of the ride is probably still to come.

The TSX/S&P Composite Index suffered its sharpest one-day drop earlier this month since the market crash of October 1987.

Financial industry workers gathered around TV sets in the basement of Toronto's Scotia Plaza were shaking their heads as the benchmark index sank 864.41 points, or 9.32 per cent, to 8,406.21 "It's going from bad to worse right now," Dale Orr, managing director of the economic consulting firm Global Insight, said from Toronto. "We are predicting the situation is going to get worse before it gets better."

Federal Finance Minister Jim Flaherty says the Conservatives have 'sufficient' measures in place.

Key indicators such as the national unemployment rate, currently sitting at 6.2 percent, are certainly not trending in the right direction, he added, and he predicted unemployment could go as high as 7.2 percent a year from now.

Orr was also waiting for "the other shoe to drop" with the effect of a higher Canadian currency in relation to the U.S. dollar.

That could mean importers face lower profit margins due to higher costs in the coming months, he said.

Ontario is in the eye of the storm when it comes to manufacturing, with an estimated 400,000 industry jobs at stake. Workers have been watching events unfold in the United States where executives from the Detroit Three automakers have been pleading with Congress for a bailout package.

General Motors was seeking US$18 billion in the form of a $12-billion term loan and a $6-billion line of credit. Meanwhile, Chrysler asked for a $7-billion bridge loan and Ford executives were asking for a $9-billion line of credit.

Sales figures released last week showed the Canadian market was headed sharply off course, with showroom sales down 10.3 percent, or more than 12,000 vehicles, to 105,221 in November compared to the same month a year ago.

"I'm surprised it wasn't even lower, given the amount of negative news surrounding the industry in the last month. The industry is in crisis," said industry analyst Dennis Desrosiers of DesRosiers Automotive Consultants. "It destroys consumer confidence. It's code for, 'Don't buy a vehicle.' " Sales so far this year are about half a percentage point higher than last year, but Desrosiers cautioned December dealer sales will likely be down, pushing annual numbers down.

"Very respectable, but not nearly the level that would have been achievable if the U.S. auto sector wasn't bleeding all over Canada during the last half of the year," he said.

Many observers were hoping for some sort of aid for domestic auto manufacturers in the federal fiscal update released late last month by Finance Minister Jim Flaherty, whose Oshawa-Whitby riding is home to a large GM plant. But when it came down to a question of spending, Flaherty initially remained firm.

After delivering the update in the House of Commons, Flaherty flew overnight to Toronto where he did a series of media interviews and gave a speech to the Economic Club.

"We have sufficient measures already in place and I personally don't believe anything further is needed at this time," he told reporters in a question-and-answer session.

That weekend, Flaherty announced the date of a federal budget would be pushed forward to Jan. 27 - the "earliest date in modern times" - and there were broad hints a stimulus package was in the works.

Also last week, Ontario Premier Dalton McGuinty tried to push for some sort of assistance amid all the political backroom negotiating. "Whatever happens on the Hill, I hope it happens sooner rather than later," McGuinty said.

Orr said Flaherty has been "traditionally pretty stingy" in the past with the auto industry and would be better off working out a Canada-U.S. bailout package to help the industry as a whole.

"I was impressed by the U.S. approach. When the automakers came to them asking for money, they said, 'All right, we want to see a plan for what you want to do with the money first,' " Orr said. "They're not just giving money away."

Meanwhile in Central and Western Canada, observers were more concerned with commodity prices. "That's the elephant in the room right now," said Todd Hirsch, a senior economist with Alberta-based ATB Financial.

Some economists were encouraged when Statistics Canada released figures last week showing a slight increase in the GDP during the third quarter. It meant Canadians were once again spared from being technically in a recession, which is defined as two consecutive quarters of negative GDP growth.

Hirsch wasn't too optimistic, however. "When you look at that GDP growth, you'll see it was mostly in July," he said. "I'm concerned because inventories are building up. It will be interesting to see if those rising inventory levels are able to meet production."

Statistics Canada officials reported the increase was led by the mining sector, especially support activities for oil and gas extraction and construction. Manufacturing inched upward, while forestry production continued to drop.

Hirsch said Albertans generally aren't too impressed with the idea of a coalition government in Ottawa and would be "unbelievably furious" at one led by Stéphane Dion.

Dion's carbon tax idea was one of the key reasons he lost Western Canadian votes in the last federal election, he noted.

Hirsch added one number that remains strong in Alberta is the province's 3.7-percent unemployment rate. "The boom is definitely slowing here, but it's not bust quite yet."

- With files from The Canadian Press (David Hatton can be reached at hatton@businessedge.ca)