Last week, The World Bank lowered its estimate for global growth in 2016 to 2.9%, from its 3.5% prediction last June. The Bank is particularly concerned about slowdowns in China and developing companies that could reverberate, long term, to advanced economies.
However, the Bank’s forecast was more optimistic about the United States, whose 2.7% economic growth in 2016, if realized, would be its fastest pace since 2006.
Whether the U.S. can outpace other nations’ economies is a topic of some debate. James Pethokoukis, a Fellow at the American Enterprise Institute, thinks the U.S. could face decades of “unhealthy economic populism” if GDP and job growth aren’t matched by productivity gains, which over the past five years have averaged only 0.6%. More dour is Citigroup, which is on record that there’s a 65% chance of another recession in the U.S. this year.
The current state of America’s stock market, which got off to a miserable start in 2016, doesn’t exactly augur happy days ahead. But that downturn, and the generally mediocre pace at which the world’s economies are moving, didn’t deter Morgan Stanley from reiterating its belief that the U.S. would continue growing through 2020, and thereby achieve the longest economic expansion in the post-World War II era.
Morgan also thinks that if the U.S. skirts another recession, corporate profit growth could lift the S&P 500 to 3,000 by 2020. (That Index ended Jan. 13 at 1,890.28, down 48.40 to its lowest level since last September. Morgan’s prediction is in sharp contrast with economic bears who are already predicting the S&P 500 could collapse by as much as 75% from its peak of 2100 last year, driven down by China’s currency deflation.)
There are three main reasons why Morgan Stanley remains bullish about the American economy:
•The U.S added about 200,000 jobs per month in 2015, its second-best year for employment gains since 1999. The employment picture spurred consumer confidence, as measured by the University of Michigan, to average 92.9 last year, the highest it’s been at since 2004.
•Americans are getting themselves out of the red. Morgan Stanley notes that debt to disposable income, at about 106%, has fallen from 138% in 2008. And the portion of loan balances that are 90-plus days delinquent fell below 4% for the first time since the recession ended.
•Big companies are cleaning up their balance sheets and being a lot more careful about what they invest in. Morgan Stanley expects capital spending-to sales at the largest 1,500 corporations to fall to 4.6%, compared to between 6% and 9% before the last two recessions. S&P 500 companies have about $100 billion in loans coming due this year and $300 billion in 2017, which Morgan considers manageable amounts.
Related Stories
Adaptive Reuse | Mar 26, 2024
Adaptive Reuse Scorecard released to help developers assess project viability
Lamar Johnson Collaborative announced the debut of the firm’s Adaptive Reuse Scorecard, a proprietary methodology to quickly analyze the viability of converting buildings to other uses.
Security and Life Safety | Mar 26, 2024
Safeguarding our schools: Strategies to protect students and keep campuses safe
HMC Architects' PreK-12 Principal in Charge, Sherry Sajadpour, shares insights from school security experts and advisors on PreK-12 design strategies.
Green | Mar 25, 2024
Zero-carbon multifamily development designed for transactive energy
Living EmPower House, which is set to be the first zero-carbon, replicable, and equitable multifamily development designed for transactive energy, recently was awarded a $9 million Next EPIC Grant Construction Loan from the State of California.
Museums | Mar 25, 2024
Chrysler Museum of Art’s newly expanded Perry Glass Studio will display the art of glassmaking
In Norfolk, Va., the Chrysler Museum of Art’s Perry Glass Studio, an educational facility for glassmaking, will open a new addition in May. That will be followed by a renovation of the existing building scheduled for completion in December.
Sustainability | Mar 21, 2024
World’s first TRUE-certified building project completed in California
GENESIS Marina, an expansive laboratory and office campus in Brisbane, Calif., is the world’s first Total Resource Use and Efficiency (TRUE)-certified construction endeavor. The certification recognizes projects that achieve outstanding levels of resource efficiency through waste reduction, reuse, and recycling practices.
Office Buildings | Mar 21, 2024
Corporate carbon reduction pledges will have big impact on office market
Corporate carbon reduction commitments will have a significant impact on office leasing over the next few years. Businesses that have pledged to reduce their organization’s impact on climate change must ensure their next lease allows them to show material progress on their goals, according to a report by JLL.
Adaptive Reuse | Mar 21, 2024
Massachusetts launches program to spur office-to-residential conversions statewide
Massachusetts Gov. Maura Healey recently launched a program to help cities across the state identify underused office buildings that are best suited for residential conversions.
Legislation | Mar 21, 2024
Bill would mandate solar panels on public buildings in New York City
A recently introduced bill in the New York City Council would mandate solar panel installations on the roofs of all city-owned buildings. The legislation would require 100 MW of solar photovoltaic systems be installed on public buildings by the end of 2025.
Office Buildings | Mar 21, 2024
BOMA updates floor measurement standard for office buildings
The Building Owners and Managers Association (BOMA) International has released its latest floor measurement standard for office buildings, BOMA 2024 for Office Buildings – ANSI/BOMA Z65.1-2024.