The U.S. economy is headed for more trouble, say Goldman Sachs economists, led by Jan Hatzius.
Hatzius and his colleagues predict an annualized contraction of 3.5 percent in the fourth quarter and 2 percent in the first quarter of 2009. That would constitute the economy’s worst six-month performance since 1982.
“Things are still deteriorating,”' Hatzius, Goldman’s chief U.S. economist, told Bloomberg TV last week. The fourth quarter will “be weaker than the third quarter and probably by quite a lot.”
The economy shrank an annualized 0.3 percent in the third quarter
Goldman also forecast that the Federal Reserve will cut the federal funds rate by 50 basis points to 0.5 percent by year-end.
The bank economists maintain that President-elect Barack Obama and Congress will come up with a fiscal stimulus package of at least $200 billion to buoy the economy.
“The persistence of economic weakness will keep pressure on policymakers to provide additional stimulus to the economy,” Hatzius wrote in Goldman’s report.
The predictions make Goldman among the most negative on Wall Street.
The median forecast among economists surveyed by Bloomberg News is for a 0.4 percent contraction in the fourth quarter and growth of 0.5 percent in the first quarter.
Obama himself acknowledged the depth of the economy’s woes last week, saying, “It is not going to be easy for us to dig ourselves out of the hole that we are in.”
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