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Bill Gross: Osborne must rethink his recovery strategy
by Sarah Miloudi on Sep 05, 2011 at 07:19
The world's biggest bond manager Bill Gross has warned the chancellor to rethink his recovery strategy or risk recession.
Gross, of the Pacific Investment Management Company (Pimco), said that a mid-course correction of the UK's fiscal plan would be enough to boost the economy and avert a full-scale slowdown, without damaging the country's credibility in the eyes of bond investors.
His comments come after a series of weak economic data released on Friday intensified fears about the UK double dipping. PMI numbers revealed that a fall-off in new orders during August prompted Britain's first drop in production levels since May 2009, while in the construction sector, activity hit a two decade low.
As well as urging the UK's chancellor George Osborne to take another look at his strategy for recovery, Gross (pictured), who runs more than $250 billion in Pimco's Total Return Fund , said that policymakers in the US and eurozone should consider modifying their plans too.
'The economy in the UK is worse off than it was when the plan was developed, so there should be at a minimum fine tuning and perhaps re-routing of the plan,' Gross said, speaking to the Times newspaper.
Gross added that the UK coalition government did deserve praise for taking the decision in 2010 to re-balance Britain's books, which made bond investors more confident in the prospects for subdued inflation and long-term rates. But Gross believes this process is happening far too quickly, and could lead to contraction.
'The problem becomes if it is too quick and swift and leads to an economic contraction, which it appears close to in the UK. Bond investors obviously want not just low inflation but some type of positive growth,' Gross explained. 'An economy that doesn't grow, like Japan, ultimately can't resolve its debt crisis either.'
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