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Quarter-End Insights

Economic Outlook: Stuck in Neutral as We Cling to Cash

Corporations have become so focused on conserving capital that long-term growth prospects are diminished.

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  • The economy is still stuck in its 2.0%-2.5% growth rate.
  • Easing manufacturing growth and a slow-to-recover housing industry are holding back economic growth.
  • Corporations are merging and buying back stock--not investing--which is reducing growth prospects and amplifying the potential for inflation.

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 remains steady at 2.0%-2.5%, as it has for the last three years. We see nothing that would cause the economy to break sharply out of that channel.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.