PIMCO Clients Forecast Low Growth World Economy

Sydney, 9 November 2011 - Pessimism about the outlook for global growth has significantly worsened since March, according to a semi-annual survey of institutional clients by leading global investment management firm PIMCO.

PIMCO surveyed clients before its recent Macroeconomic Forum and asked respondents to classify themselves as either an optimist or pessimist on growth and inflation in Australia, US, Europe, UK, Japan and China. The definition of optimist or pessimist is provided in the table below. The September survey, which captured views of investors representing $300 billion in institutional superannuation assets, also asked respondents to list what they see as their biggest concerns and opportunities over the coming year.

Only 20% of September respondents were optimistic about the outlook for the US, down from 50% who held this view in March. Pessimists, who comprised the majority view, believed zero real growth was likely.

The survey group was also increasingly pessimistic about Europe. Pessimists rose from 67% (March) to 95% (September) with forecasts that European growth would be a negative 0.50%.

Respondents were evenly divided on the outlook for China. Optimists forecast 9% GDP growth versus 7% for pessimists.

John Wilson, Head of PIMCO Australia, said that expectations about the Australian outlook had worsened since March. "Only 30% of respondents were optimistic about the Australian economy, forecasting 4% growth in September versus 58% in March," Mr Wilson said. The majority of respondents expected 2.25% GDP growth over the next year.

Despite more individuals being pessimistic about the Australian growth outlook relative to the March survey results, Mr Wilson said Australia still has flexibility to steer the economy. "The current monetary and fiscal policy stance, as well a floating currency, gives Australia's policymakers ample flexibility to cut interest rates and provide liquidity support for banks if necessary," he said.

PIMCO clients also noted what they see as opportunities over the coming year. "The biggest opportunities seen by our clients are skilled "alpha" strategies; fixed income credit strategies hedged into AUD; infrastructure; Australian shares paying high/fully franked dividends; and gold," Mr Wilson said.

About PIMCO
PIMCO is a leading global investment management firm with more than 1,400 employees in offices in all major financial centres, including Sydney, and acts as advisors and asset managers to central banks, corporations, universities, foundations and endowments. In Australia, PIMCO manages more than $30 billion across a wide range of fixed income funds and strategies, for large superannuation funds , self managed super funds, institutional investors and tens of thousands of individual investors. The company is headquartered in Newport Beach, California.

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