Gas Prices Have Taken Air Out of US Recovery: Welch

What looked to be a fairly robust economic recovery has turned lackluster thanks to rising gas prices and uncertainty over demand, according to author and former General Electric CEO Jack Welch.

Jack Welch appears on Squawk Box.
Jack Welch appears on Squawk Box.

When gross domestic product growth registered a surprising 3 percent for the fourth quarter last year, Welch figured the U.S. economywas about to embark on strong growth that would outpace many of its global competitors.

But since then, an unexpected surge of prices at the pump coupled with continuing tightness in credit has him rethinking his position.

"It's not taking off. We're sort of relatively strong but not booming," Welch said in a CNBC interview. "I am normally to one extreme or another and I'm a little shaken about not knowing where this is going."

Gasoline is nearing $4 a gallon nationwide, with the peak driving season still to come. At $3.91 a gallon, gas is up 22 cents over the past month and 33 cents from a year ago, according to AAA. The price is just 20 cents from its record high in July 2008.

Despite the rise, consumer confidencehad been increasing steadily. But new numbers released Tuesday showed fear creeping in about energy inflation, and the stock marketregistered what has become a rare losing day amid the economic unease.

"The thing that surprised me was that the fourth quarter takeoff didn't go into the first quarter for the short-cycle businesses," Welch said. "Gasoline prices — you can't have this jump and not think that it affects the pocketbook."

Welch also worries that coming changes in tax structure — specifically the elimination of across-the-board tax cuts from former President George W. Bush — combined with burdensome regulations will hit the "ultimate demand" that powers the economy.

"There's no question this demand is going to be sapped away by uncertainty over taxes, uncertainty over gas prices," he said. "That's not so uncertain. That's happening every day when you go to the pump."