(Bloomberg) -- Pacific Investment Management Co., the world’s largest bond manager, said global economic growth will be steady over the coming 12 months because of asset purchases by central banks in 2013.
Economic output will expand in the range of 2.5% to 3% through March of next year, compared with 2.9% for the year ended Dec. 31, Saumil Parikh, a generalist portfolio manager at Newport Beach, California-based Pimco, said in a report being posted on its website today.
“The global economy will likely experience steady, broad- based growth in 2014 thanks in no small part to the extraordinary expansion in central bank balance sheets,” wrote Parikh, a member of Pimco’s investment committee, which sets investing guidelines for funds. Rising asset prices combined with fading near-term fiscal uncertainties will boost stability, he said.
Mohamed El-Erian, who was Pimco’s chief executive officer and co-chief investment officer before announcing his resignation Jan. 21, and co-founder Bill Gross coined the term “new normal” in 2009 to describe an era of lower returns, heightened government regulation and shrinking U.S. clout in the world economy following the 2007-2009 financial crisis. The firm oversees about $1.9 trillion, including $236 billion in Pimco Total Return Fund, the biggest fixed-income mutual fund.
The U.S. economy will expand by 2.5% to 3% in the next 12 months, compared with 2.5% in the four quarters through Dec. 31, because of higher consumer spending and the potential for more capital outlays by corporations. The poor quality of job creation could temper gains as fewer people buy homes, Parikh said.
Japan, China
The euro area will experience growth of 1% to 1.5%, up from 0.5%, as the drag from fiscal policy restraint eases and domestic demand increases, according to the report.
Japan will be the only major developed economy to experience a slowdown, dropping to 0.5% to 1% growth from 2.7%, following a reduction in “extraordinary” fiscal stimulus last year, Pimco estimates. China, the world’s second-largest economy, will grow 6.5% to 7.5%, according to the report.
“China’s outlook poses increasing downside risk to the global outlook in 2015 and beyond,” Parikh wrote.
Pimco is a unit of Munich-based insurer Allianz SE. Its Total Return fund, run by Gross, has struggled with redemptions and underperformance in the past 12 months.
