Pacific Investment Management Co.’s Mohamed El-Erian called recent declines in purchasing manager indexes in Europe and Asia “frightening” and said the world economy is suffering its severest slowdown since the global recession ended in 2009.
El-Erian, who is chief executive officer of the Newport Beach, California-based Pimco, predicted global growth of 2.25 percent over the next 12 months. That’s down from the 3.9 percent in 2011 and 5.3 percent in 2010 recorded by the International Monetary Fund. The world economy contracted 0.6 percent in 2009.
Pacific Investment Management Co.’s Mohamed El-Erian said he expects the euro area’s economy to contract by 1.5 percent over the coming year. Photographer: Jonathan Alcorn/Bloomberg
“This is a serious, synchronized slowdown,” El-Erian said in an interview today.
His forecast highlights the troubles the global economy is facing as the euro area struggles to contain its debt crisis and growth in the U.S. and China slows. Separate surveys ofpurchasing managers released yesterday showed manufacturing in the 17-nation euro area shrinking by the most in 37 months while Chinese factories teetered on the edge of contraction.
The global slowdown is weighing on the U.S. at a time when its economy is already struggling, El-Erian said. He sees U.S. growth of 1.5 percent over the next 12 months, dangerously close to what may be considered “stall speed,” and puts the odds of an American recession at roughly 25 to 33 percent.
“While a recession is not my baseline forecast, it certainly is a serious risk,” said El-Erian, whose firm manages the world’s largest bond fund.