Thursday, December 9, 2010

2011 U.S. Economic Forecasts Are Finely Being Raised by Economists

Mohamed El-Erian
In a Bloomberg interview today, Pacific Investment Management Company's Chief Executive Officer, Mohamed El-Erian said that they are increasing their U.S. growth rate for 2011. PIMCO is the world’s largest bond fund manager. El-Erian said that U.S. policy makers are pumping “massive amounts of stimulus into the economy." He commented that they have increased the economic growth rate for second half of 2011 from 3 percent to 3.5 percent. That compares with their previous estimate for 2 percent to 2.5 percent growth.

Equally as optimistic is the Wells Fargo Securities Economic Group which just delivered the Annal Economic Outlook for 2011. They said, "Despite the challenges that face us, we have turned the corner and emerged from the deepest recession in half a century, but the road ahead looks to be a long, uphill climb. This recession’s legacy of damaged consumer balance sheets, experimental monetary policy, and fiscal imbalances will add considerable mileage to our journey towards renewed economic vitality; however, we believe the American economy will continue growing mile by mile, quarter by quarter."

The table below is from the Wells Fargo Securities Economic Group's December 8, 2010 Annual Economic Outlook 2011. They have second half 2011 real GDP rates growing to near 4 percent. Click to enlarge.

David Greenlaw and Richard Berner
This week, Richard Berner and David Greenlaw of Morgan Stanley estimated that the tax deal could boost U.S. growth to 4%+ in 2011. They wrote, "President Obama has announced a ‘framework' agreement with Republican Congressional leaders that could, if enacted, boost growth over the four quarters of 2011 by 1.0 - 1.2% relative to our baseline forecast of 3.0%."

Dr. David Krause, AIM program director said, "We've been seeing stronger macro-economic data the past 6 weeks or so. It now appears that 2011 forecasts are being upped by leading economists to reflect what we have been seeing on the ground - increased consumer optimism and business spending. While the GDP numbers will look better and better, I still believe that employment will lag. With QE2 and President Obama's proposed tax rate concession and payroll tax reduction, I think more economists are going to have to acknowledge that 2011 will be much better than expected."


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