Last week's -4.8% GDP which officially heralded the start of the recession, was panned as the worst economic print since the financial crisis, and one which is about to get far worse in Q2, when some expect a GDP drop as much as 40%.
But before we get to Q2 we have two more revisions of the first quarter GDP number, and according to Goldman, before all is said and done, the first quarter GDP drop may end up matching the collapse recorded in Q4 2008.
According to Goldman's economists, today's Factory orders - which declined 10.3% in March, missing expectations for a smaller decrease - will be the catalyst for further aggressive cuts to the Q1 GDP print. As the bank explains, "growth in core capital goods orders for February was revised up by 0.2pp to -0.7%, and growth in core capital goods shipments was revised down by 0.1pp to -0.9%. Growth in core capital goods orders and shipments were left unrevised in prior months."
And so, reflecting the growing weakness in non-durable inventories and the net downward revisions to March durable goods data, Goldman further lowered its first quarter tracking estimate for the May 28th Q1 GDP revision by five tenths to -7.2%, roughly 50% lower than the -4.8% originally reported. Worse, as additional source data is incorporated and non-response biases are resolved, Goldman expects the final vintage of the data to show an even larger decline of -8.2% (-0.5pp relative to our previous estimate of -7.7%), which would match the Q4 2008 drop when the financial system was on the verge of collapse.
Of course, all of this only looks at Q1, when the US economy was only impaired for about 2 weeks in late March when widespread shutdowns were launched. One can only imaging what Q2 GDP will look like.