Stronger than expected GDP growth in the second quarter rising to 2.5%; great news, right?
Not so fast, according to PIMCO chief Mohamed El-Erian. Emerging-market woes will create (that dreaded word) headwinds for the U.S. economy.
“Longer term, we should care due to the feedback loop to the U.S.,” El-Erian, chief executive and co-chief investment officer of the world’s biggest manager of bond funds, said in a radio interview with Bloomberg Surveillance on Thursday. “You will see a tightening of financial conditions to markets. You will see growth more challenged and the ability of U.S. companies to get topline growth from emerging markets is going to be less going forward.”
As the news service notes, global stocks, bonds and commodities have been whipsawed since May, when Federal Reserve Chairman Ben Bernanke signaled the prospect of cuts to monetary stimulus should the U.S. economy and job market continue to improve. The Fed will probably pare its $85 billion a month in bond purchases at its Sept. 17-18 meeting, according to 65% of economists surveyed by Bloomberg Aug. 9-13.