Pimco Sees Global Growth Slowing After U.S. Tightening – Bloomberg 12-11-12

Salient to Investors:

Saumil Parikh at Pimco said:

Global growth will slow to 1.3 percent to 1.8 percent from 2 percent in 2012 as the private sector isn’t healthy enough to step in and extend credit amid deleveraging. The average economist expects growth of 2.5 percent in 2013.
Central banks are effective in boosting asset prices, but gradually losing effectiveness in helping the real economy.
The low growth rates of corporate profits and investment means a near stall speed of the global economy.
US economic growth will drop to 1.25 to 1.75 percent in 2013 from 2.2 percent in Q4 2012 due to untimely fiscal tightening and increasingly ineffective monetary easing. The average economist expects 2 percent growth in 2013. US growth will be buoyed by residential investment and an increase in home prices, which will support consumption in the US as long as interest rates remain low.
Draghi’s plan for an unlimited bond-buying program to fight speculation of a currency breakup was positive, but fiscal austerity will continue to drag on growth in 2013 as the euro-area shrinks 1 percent to 1.5 percent.
China will grow 6.5 percent to 7.5 percent in 2013, but won’t be able to sustain this level without making structural changes such as giving security to an aging population.
Japan will grow 0.5 percent to 1 percent in 2013, up from 0 percent in 2012, on more-aggressive BOJ buying of assets to raise inflation expectations.