Investors are more optimistic this month about the economy than they were last month, according to a survey released on Tuesday.

The BofA Merrill Lynch Survey of Fund Managers for August found that investors are less bearish about the outlook for the global economy and corporate earnings.

A net five percent of respondents predicted the global economy will improve in the next year, compared to a net 12% in July who predicted the world economy would deteriorate.

Meanwhile, 73% of respondents are expecting below-trend growth and inflation, the same percentage as last month. Seventy eight percent of respondents think a double-dip recession is unlikely.

One percent of respondents expect inflation to be lower in one year, compared to July when 12% expected inflation to decrease. At the same time, 55% of respondents don’t think the Federal Reserve will raise interest rates before the third quarter of 2011.

“The spotlight of investor pessimism has shifted away from China and Europe to Japan and the U.S.,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Global Research, in a press release. “Investors clearly remain cautious, so better news on U.S. growth and fiscal policy would be a pleasant surprise.”

Investors reduced their cash holdings in August and moved more money into equities and away from bonds, according to the survey. Investors moved away from U.S. and Japanese equities, but increased their demand for Eurozone equities.

“Investor sentiment on Europe has staged a remarkable recovery in the past few months, underpinned by greater optimism about Europe’s banks. Economic data now has to continue to support this shift,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research, in a press release.

Meanwhile, the survey showed that investors think the U.S. dollar looks undervalued, while the Japanese yen is seen as overvalued.

One hundred and eighty seven fund managers, managing a total of $513 billion, participated in the global survey from 6 August to 12 August. A total of 157 managers, managing $327 billion participated in the regional surveys.