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By Jeremy Glaser and Robert Johnson, CFA | 05-20-2015 11:00 AM

Johnson: Economy More Stable Than Many Think

The improving housing market will be a key contributor to growth in 2015, says Morningstar's Bob Johnson.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. I'm joined today by Bob Johnson--he is our director of economic analysis. He thinks the economy is more stable than many observers believe, and we're here to talk about why.

Bob, thanks for joining me.

Bob Johnson: Great to be here today.

Glaser: So, going into the year, people were really excited about the prospects for the economy, and now it seems like everybody is very fearful about the prospects for the economy. When you look at the state of the U.S. economy right now, why do you think people are in this feast-or-famine mindset?

Johnson: The right thing to do over the long term is not to use the feast-or-famine analogy but instead to use the ocean-liner analogy, meaning that the economy is moving at a very steady pace and it's very hard to change either its speed or its direction. We believe the ongoing underlying rate is 2% to 2.5%.

People got really excited that we were going to grow much faster this year in November and December because they saw falling gasoline prices and an improving employment situation. [People thought that] a lot of customers were going to spend more, and we were going to have a great economy and grow 3% or more.

Lo and behold, weather intervened and we had a tough first quarter, weather-wise, which really kept a lot of people out of restaurants and put them in grocery stores instead a little bit. It kept them off of a lot of services, and so the first quarter was certainly not a good one for the consumer. So, that certainly held us back, and some of the spending in the oil-related sectors has slowed down. So now, people are thinking that maybe we're not going to grow at all--or at least not very much--this year and maybe we even go into a recession. I don't think that's true either. I think you've got to take a more balanced view.

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