Still digging out of my email from last week, I came across this:
The Outlook for 2010/11: Exciting, with Risks!
As has become the norm, at this time of the year we present our updated economic forecasts for the following year, and unveil our forecasts for the year after that. Today, we announce our updated forecasts for 2010, and unveil our 2011 forecasts for GDP and inflation.
We are also releasing our initial ‘Top Trades’ for 2010, something which we hope will stimulate the minds of investors—as is often the case.
With respect to GDP growth, according to our forecasts both 2010 and 2011 are going to be rather strong years.
We now forecast 4.4% for 2010, and a higher 4.5% for 2011. We are above consensus for next year and, while there is no consensus as such for 2011, we suspect we are significantly higher than consensus for 2011 also.
With respect to inflation, we are below consensus, despite our relative optimism on GDP. If this is correct, the combination of better than expected growth and lower than expected inflation should be good news for financial markets. This is reflected in our equity and bond projections, and in our initial ‘Top Trades for 2010’.
A key belief of ours—as recognised in these forecasts— is that, despite the credit crisis, the world economy’s growth potential is probably around 4%, which does allow the post-crisis recovery to be stronger without generating inflationary pressures.
Color me surprised . . .
Goldman Sachs Global Economics,
Jim O’Neill, Dominic Wilson, Peter Berezin, Anna Stupnytska, Swarnali Ahmed, Alex Kelston
Commodities and Strategy Research