By Greg Peel

Every March and September leading global investment manager PIMCO conducts a survey of institutional clients to gauge their level of optimism or pessimism with respect to global economic growth and inflation. The results of the September survey are now in. Not unsurprisingly, PIMCO's clients have become a lot more pessimistic than they were in March. The survey covers expectations for the US, Europe, the UK, China, Japan and Australia.

In March, when the latest round in the European crisis was yet to hit, no one was talking US double dip, and Chinese tightening was yet to cause any real fear, PIMCO's clients were divided down the middle with respect to the world's largest economy. In September (when all of the above factors were front and centre), only 20% of respondents felt optimistic about the US economy. The pessimists believed zero real GDP growth was likely over the next year.

In September a full 95% of respondents were pessimistic about Europe, down from 67% in March, with expectations being for negative 0.5% growth. September's results saw an even split over China, albeit optimistic respondents saw 9% growth compared to 7% growth for the pessimists.

In March, 58% of respondents were optimistic about Australia but that number fell to 30% in September, with 2.25% growth expected by the pessimists.

Head of PIMCO Australia, John Wilson, nevertheless notes that Australia can boast policy flexibility which other economies lack, allowing the Australian economy to be steered through difficult times. Room to move on RBA rates, fiscal opportunities and a floating currency provide such flexibility.