Last week, when Google CEO Eric Schmidt (GOOG) described the economy as "pretty dire" and said Google was "not immune," some analysts argued that Eric's comments were not new and should not be taken to mean that Google's business is deteriorating.

This interpretation seemed like wishful thinking. According to sources, it was.

The search business has deteriorated markedly this quarter, industry sources say, especially over the past month. A source at Google says the company's revenue has decelerated rapidly over the same period.

Wall Street estimates already call for a severe slowdown in Google's revenue growth this quarter, from 25% year over year growth in Q4 to 11% in Q1. Some of the revenue deceleration, therefore, is likely in the stock. The revenue weakness has reportedly gotten worse over the past month, however, so Q2 is likely to be affected more than Q1.

Wall Street currently expects Google's revenue growth to stabilize around 10% for the next three quarters and then accelerate in Q4. Based on recent trends in the business, we think this, too is wishful thinking. We expect Wall Street estimates to continue to come down.