Finance time

Goldman Sachs Group Inc. predicted a deeper global recession than it previously anticipated and said the slump could yet worsen.

Goldman Sachs now expects worldwide gross domestic product to shrink 0.6 percent in 2009 compared to a previous forecast for a 0.2 percent contraction, London-based economist Binit Patel said today in a report to clients.

“The economic environment overall is still likely to remain challenging and uncertainty is high,” Patel wrote.

Already stuck in its worst recession since World War II, the world economy is deteriorating even as central banks slash their interest rates to record lows and governments rescue banks and introduce stimulus packages. U.S. stock futures extended declines after the Goldman report.

Goldman released its new forecast as the European Central Bank and Bank of England follow the U.S. Federal Reserve in cutting interest rates to the lowest ever. A report today showed European consumer spending fell the most in 13 years in the fourth quarter, while China signaled it may not extend its stimulus plan.

U.S. Treasury Secretary Timothy Geithner yesterday said the U.S. recession is “deepening” and the Fed said there’s little hope of an improvement in coming months. Italian Finance Minister Giulio Tremonti said in Rome today that “looking beyond all forecasts, we know we are in an unknown territory credit reports free.”

Companies’ Pain

Companies reported fresh pain today as Salzgitter AG, Germany’s largest steelmaker, said it’s unlikely to break even in the first half. Aviva Plc, the U.K.’s biggest insurer, posted a full-year loss.

Patel said that in 1982 — the weakest year in the downturn at the start of that decade — the world economy grew 0.9 percent. He said his new forecast may be downgraded again to show a 0.7 percent contraction as Goldman Sachs reviews estimates for Europe. Earlier this week, the bank cut its estimate for the U.S. by a percentage point to show a 3.2 percent slump this year in the world’s largest economy.

Patel wrote that the new forecast compares with an economists’ consensus prediction for a global expansion of 0.1 percent.

While economists vary in how they measure the global economy, those at JPMorgan Chase & Co. last week cut their forecast to show shrinkage of 2.2 percent from 2 percent this year. Their counterparts at Deutsche Bank AG anticipate a 0.9 percent slide and the International Monetary Fund predicts growth of 0.5 percent.

Source

Filed under: technology by John