American Action Forum President Douglas Holtz-Eakin laid out why Americans should be wary of how the 2024 economy will play out on CNBC’s “SquawkBox” Thursday.
Holtz-Eakin highlighted that inflation could linger for an additional year before reaching the Federal Reserve’s target of 2% in the interview. He also noted that high gross domestic product (GDP) numbers in the third quarter of 2023 were heavily dependent on government spending as well as various other concerns. (RELATED: ‘That’s Not The Whole Story’: Seemingly Rosy Jobs Report Reveals Worrying Workforce Trends, Economists Say)
“I think there’s still reason to be cautious,” Holtz-Eakin asserted. “You know, core PCE peaked at 5.6%, we’re now at 3.2 year over year. So we’re two-thirds of the way to the target. That took two years. So we might have another year of disinflation to get back to the target. We’re hardly done. There’s a lot in the real economy, I think, to be cautious about.”
The GDP for the third quarter of 2023 was notably high at 4.9% year-over-year, but received a boost from a huge increase in federal spending, according to data from the Bureau of Economic Analysis. That was significantly higher than the 2.1% increase in the second quarter.
“If you look at the big third quarter GDP numbers, inside that, it was all driven by households and government spending,” Holtz-Eakin said. “I’m a little concerned about households. We’re seeing credit card delinquencies rise”
Holtz-Eakin acknowledged inflation has been moving in the right direction but cautioned that was due to favorable circumstances that may not necessarily persist in 2024.
“There’s been enormous amounts of progress on inflation,” he said. “No question about it. Remember, everything broke our way in 2023. A productivity bump no one saw coming. 2.3%. We had declining energy prices. 6% year over year. Moderation of food inflation. Everything that can go right did. That’s not going to happen every year. Being cautious where we land in 2024 is the right stance right now.”
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