Caterpillar Inc. (CAT) cut is full-year sales and profit forecasts Tuesday and admitted it had underestimated the severity of the global economic downturn.

The world's largest maker of construction equipment had seen sales soar during the extended commodity boom, but is cutting production and underscored the uncertainty over a recovery as its 2009 sales forecast carries a range of plus or minus 10%.

The U.S. group, which beat expectations in reporting a first-quarter loss, said the "overall economic environment has deteriorated" despite government stimulus efforts and a relatively bullish stance on commodity prices.

Its share slipped 0.2% to $30.27 in early trade.

Caterpillar also trimmed its forecast for global GDP growth this year from flat to a fall of at least 1.3%. It added that tight credit conditions could delay a recovery for at least a quarter, though its finance arm is fully funded for 2009 after successfully issuing debt.

"A great deal of uncertainty exists in the global economy, making it extremely difficult to know how our customers will respond during the remainder of 2009," said chairman and CEO Jim Owens in a statement.

Its profit forecast was halved to $1.25 a share on mid-range revenue of $35 billion. In January, Caterpillar said it expected to earn $2.50 a share on sales of about $40 billion.

A net loss of $112 million, or 19 cents a share, in the March quarter compared with year-earlier income of $922 million, or $1.45 a share. Excluding $558 million in costs for employee layoffs and plant closings, the company would have posted a 39-cent profit. Sales in the quarter fell by 22% to $9.23 billion.

The company easily topped Wall Street analysts' expectation of 4 cents per share of earnings on revenue of $8.54 billion.

Caterpillar expects total restructuring costs this year to reach $700 million. It is shedding about 25,000 jobs as it closes plants, shortens work weeks and implements other cost-cutting initiatives.

Caterpillar predicted the U.S. economic stimulus program is having little effect on sales, concluding the $70 billion designated for infrastructure construction is not enough to offset the declines seen in private-sector construction spending.

It was more optimistic about overseas initiatives, notably in China.

The infrastructure and commodities boom powered Caterpillar for roughly five years, helping it more than double its annual revenue from 2002 to 2007, but collapsed late last year.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

(Tess Stynes contributed to this report)