Sunday, October 31, 2010
Things are looking up for the U.S. economy - according to the AIM student survey
"Real gross domestic product (the output of goods and services produced by the U.S. economy) increased at an annual rate of 2.0% in the third quarter of 2010," according to Krause. "This 'advanced' estimate was released by the Bureau of Economic Analysis on Friday.The GDP growth rate of 2% is well below the 3% average for the last 30 years; however, prospects for 2011 according to economists are 3%. The AIM students, on average, are looking for 2011 GDP growth rates to improve throughout the year and to be in excess of 3.5% by the fourth quarter of 2011. The thought is that the stimulus and bailouts will have a far more favorable impact than most economists and politicians have been predicting. The students feel that U.S. exports will be stronger than expected because of the weaker U.S. Dollar and business investments will lead the economy in 2011. Additionally, auto sales and other final sales - led by a slight improvement in consumer demand - will surprise many economists and pundits on the upside."
Calculated Risk and includes the average of the New York and Philly Fed surveys - and other Fed districts (green line). The Institute for Supply Management's (ISM) Purchasing Managers Index (red) is also shown. The graph and the Index of Leading Indicators (not shown) are suggesting that the threat of a double dip recession has passed and that expansion is likely in 2011," said Dr. Krause.
"The AIM student macro-economic and interest rate forecasts are used to set the strategy for the AIM Fixed Income Fund," Dr. Krause added. "This week the students will adjust their fixed income portfolio based on their 3- and 6-month economic forecasts. In an upcoming blog we will summarize their fixed income investment strategy and underlying assumptions. As you can tell from the comments above, the consensus of the AIM students is for a stronger economy in 2011."