Economic outlook: Stuck in neutral as we cling to cash

Robert Johnson, CFA 6 July, 2015 | 5:00PM
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Despite a lot of ups and downs over the last three months, our full-year economic forecast remains relatively unchanged since our last report. Our full-year GDP growth forecast for the United States remains steady at 2%-2.5%, as it has for the last three years. We see nothing that would cause the U.S. economy to break sharply out of that channel.

Also, we are not changing our full-year forecast despite a first quarter that was disappointing to many. Weather and poorly constructed seasonal adjustment factors produced a decline, just as they did in 2014. The first quarter of 2015 also suffered further from labour actions at West Coast ports that shifted the flow of imports and, to a lesser degree, exports.

Just as in 2014, we expect unusually large growth rates in the back half of the year to make up for the shortfall in the first quarter. This implies that growth will need to average over 3% for the last three quarters of the year. That said, we don't expect the bounce to be quite as large as in 2014. The first-quarter inventory drawdown was not nearly as dire in 2015, which means the subsequent bounce-back can't be nearly as large, either.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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