The Congressional Budget Office published a disturbing report warning of a slowdown in economic growth in 2023.
What about the details?
CBO has adjusted its economic growth outlook 2023 on the basis of several factors that negatively impact the economy. These include high inflation, high interest rate (a direct consequence of inflation) and dizzying employment figures.
CBO’s current assessment states that economic growth will likely be slower than anticipated by the agency in May 2022. This is due to recent developments (including higher interest rate) and more rapid in 2024 as the economy recovers.
The report stated that “Rates of unemployment and inflation will likely be higher over two years than CBO predicted in May 2022.” Federal deficits and debt will increase due to slower economic growth, higher rates of inflation, unemployment, and interest.
The report is in line with economists who believe the U.S. could contract next year despite Q3 GDP growth.
“From the fourth quarter of 2022 to the fourth quarter of 2023, CBO estimates, there is a two-thirds chance that growth in economic output–specifically, gross domestic product adjusted to remove the effects of inflation, or real GDP–will be between -2.0% and 1.8%,” the report explained.
Is there a recession on the horizon?
The CBO report doesn’t mention a recession. However, Tiffany Wilding, an economist at PIMCO, explained this week that despite Q3 GDP growth of 2.9%, her company still believes in a recession.
Wilding stated on CNBC that core growth has slowed down a lot and this is even before you start to feel the effects [Federal Reserve] policy. Fed tightening works with a lag,” Wilding added.
She stated that she believed the economy would slip into recession next year due to tightening financial conditions.
Rep. Jason Smith (R.Mo. Rep. Jason Smith (R-Mo.), who is the top Republican in the House Budget Committee, stated that the CBO report shows President Joe Biden’s policies have failed Americans.
Smith stated in a statement that “this report shows that Americans will continue to feel years of the Democrats’ failed economy policies unless better policies and policies are in place to strengthen America, grow jobs, wages, and reduce reckless spending.”