Andrew Hollenhorst, Citi's chief U.S. economist, predicted on CNBC Thursday that the U.S. economy is heading into recession due to inflation and credit card delinquency.

The consumer price index rose 3.1% year-on-year in January, beating expectations of 2.9%, while credit card delinquency rates of 90 days or more reached 6.36% in the fourth quarter of 2023. Hollenhorst told CNBC host Sarah Eisen. He does not believe the data indicates a “soft landing” for the U.S. economy. (Related article: 'What people feel and know': Legendary economist explains why corporate media misunderstands voters' views on the economy)

“There's a very strong and fascinating story about this being a soft landing, but we just haven't confirmed it with the data. I think that's what we've seen over the last few days. ” Hollenhorst told his “Money Movers” co-hosts. “Inflation is getting too high and the activity data is debatable. There's a big seasonal factor in January, so I think that's part of why the market is a little skeptical about this number. But what we saw this morning was a pretty significant drop in retail sales.”

Eisen noted that gross domestic product (GDP) in the fourth quarter of 2023 looks solid, increasing by 3.3%, and that retail sales in January were affected by weather and Christmas presents. He pushed back on Hollenhorst's claims.

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“The question is: do these forward-looking indicators indicate where we are going? We have just released some very strong jobs numbers, with over 350,000 people employed. But within that employment report, in certain sectors like restaurants, people are working fewer hours and the number of full-time workers is decreasing. Hiring is not going well,” Hollenhorst said. .

“I think what happens in the labor market is key to the economy,” Hollenhorst continued. “If the unemployment rate remains low, people will continue to spend and the economy will hold up. But if the unemployment rate starts to rise, and we think it will, this morning's continued unemployment claims indicate that I think we've seen that, and that's a sign of much more significant declines in activity in the U.S. economy.”

Hollenhorst also pointed out that data on credit card delinquencies suggests people are using up their savings.

“I think you can see that in the data, especially the credit card delinquency data. New data was just released on that last week, and you can see that delinquencies are increasing,” Hollenhorst said. “What this tells us is that some consumers may still have excess savings, but consumers who are currently exposed to variable rate credit card debt at much higher interest rates will be able to use their excess savings to This means that they continue to consume by withdrawing their income.'' Expenses have increased, and now the arrears are increasing. So I think we're starting to see weaknesses in the data. ”

“If the economy slows down this much, I think inflation will probably come down as well,” Hollenhorst added. “What I'm really trying to say here is that a soft landing is the least likely scenario.”

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