Just how far and how fast will the economy drop this quarter? There’s lately been a race to the bottom among forecasters, with the economists at Goldman Sachs leading the way. Early in the week, they put out a report saying that -3.5% annualized GDP growth was their baseline forecast for the quarter, but they also went so far as to outline a “just awful” scenario of -6.0% and a “worst case” of -7.8%. Today they updated their baseline forecast to -5%.<\/p>\n
That puts Goldman well ahead, for the moment at least, of even Nouriel Roubini, the New York University professor known as Dr. Doom \u201d\u201d whose current forecast is about -4%. Lots of Wall Street economists less renowned for their gloominess have by now moved past the -3% mark. In fact, one explanation for the stock market’s horrible week could be that the realization of just how bad the quarter will be is finally sinking in among investors.<\/p>\n
We haven’t been through anything this bad in a while. The last time the economy shrank faster than 3% was in the first quarter of 1982, when GDP dropped at a 6.4% annual rate. It hasn’t exceeded Goldman’s worst-case forecast of -7.8% since the first quarter of 1958, when it was -10.4%.<\/p>\n