The home side were set 184 for victory at The Oval, but came up just short in their run chase, despite Alex Hales's 66-run innings.
Morgan, who made just five runs, told Sky Sports News: "Yeah, I think we were [outplayed in all departments]. It's devastating. In the first 15 overs we bowled really well and fielded okay and then we sort of fell away.
"No excuses here. Perfect fielding conditions and we dropped three. It's inexcusable."
The teams play again in the first one-day international on Saturday.