El-Erian: 2014 Shapes Up as a 'Pretty Good' Year

Monday, 23 Dec 2013 06:32 PM

By Dan Weil

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Count Pimco CEO Mohamed El-Erian as a cautious optimist for the U.S. economy in 2014.

Next year is "certain to be better in terms of growth,” he told Yahoo. El-Erian forecast a GDP expansion in the range of 2.25 percent to 2.75 percent.

"That’s pretty good growth performance for an economy that’s been stuck in second gear," El-Erian said.

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The economy averaged annualized growth of 2.6 percent in the first three quarters of this year. But that included an outlying expansion of 4.1 percent for the third quarter.

Rising inventories accounted for much of the outsize gain in the third quarter, which many experts say doesn't reflect the economy's underlying strength.

"The really good news is if we get a few things out of Washington to give confidence to business to invest, you could have significantly higher growth" than he forecast, El-Erian said. But, "unfortunately that's unlikely right now," he said.

Those items include clarity on taxes for the medium term, public infrastructure investment and measures to ease unemployment, particularly assisting the long-term jobless.

On the plus side, a debt default isn't coming, El-Erian says. "But we're not going have the tailwinds this economy needs."

Some experts see plenty of room for cheer in the economy.

"You have equity markets supporting household net worth, rising home values and also payroll gains and falling unemployment, so we do really look for consumption to start picking up," Robert Rosener, associate economist at Credit Agricole CIB in New York, told Bloomberg.

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