Mohamed El-Erian of PIMCO, one of the top investment firms with more than $1.7 trillion of managed funds, has been apprehensive with current global economic conditions.
From Bloomberg,
Pacific Investment Management Co.’s Mohamed El-Erian called recent declines in purchasing manager indexes in Europe and Asia “frightening” and said the world economy is suffering its severest slowdown since the global recession ended in 2009.
El-Erian, who is chief executive officer of the Newport Beach, California-based Pimco, predicted global growth of 2.25 percent over the next 12 months. That’s down from the 3.9 percent in 2011 and 5.3 percent in 2010 recorded by the International Monetary Fund. The world economy contracted 0.6 percent in 2009.
“This is a serious, synchronized slowdown,” El-Erian said in an interview today.
His forecast highlights the troubles the global economy is facing as the euro area struggles to contain its debt crisis and growth in the U.S. and China slows. Separate surveys of purchasing managers released yesterday showed manufacturing in the 17-nation euro area shrinking by the most in 37 months while Chinese factories teetered on the edge of contraction.
Mr. El-Erian shares my concern about the huge uncertainty which beclouds the global economy.
The growing risks of global recession, in my view, has been brought about by political gridlocks in major economies, aside from tentative central bankers who seem to have shifted to Public Relations work to manage the public’s expectations than from taking real actions.
Considering that global financial markets and economies have become heavily dependent on central banking steroids, the dearth of these only brings to the surface all the misdirected investments which only magnifies the bubble busting conditions.
Below is a list of the factory activities of some of the major economies of the world. Table from the Wall Street Journal Blog
About 70% of the global factory activity index has been in contraction, this includes all G-7 economies.
To add, over the past three days, news seems to be getting a lot bleaker.
Taiwan’s economy contracted in the three months which ended in June (BBC).
Japan’s industrial output fell for the third straight month. (BBC)
South Korea’s factory index sank the most in seven months in July (CNBC)
US consumer spending slips in June (Northern Trust)
US Manufacturing contracts for the second month in a row (Zero Hedge)
This morning, China’s non-manufacturing industries expanded at a slower pace in July as new orders and outlooks for future business slipped, an official survey indicated (Bloomberg)
This seems congruent to the recent decline of China’s Manufacturing Index which seems at the brink of contraction (Bloomberg)
Be careful out there.
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