White House's Economic Forecasts

The White House recently lowered its forecast for economic growth this year even as it slightly upgraded its outlook for unemployment. The administration expects the GDP to grow by 2.3%, down from a previous projection of 2.9%. The main reason for the downgrade was due to extremely weak start in Q1 2007. The economic growth was merely 0.6% in this period, its worst showing in more than 4 years. The economy did much better in 2006 growing by 3.1%. The administration expects the economy will regain speed and grow by 3.1% in 2008 and 2009.

Federal Reserve Chairman Ben Bernanke, the administration and private economists expect the economy will rebound in the months ahead. The housing sector will play an important role in deciding whether the economy will improve or get worse. As of now no one is quite clear whether the housing market has bottomed out or there is more in store.

However the unemployment rate, which averaged 4.6% last year is expected to dip to 4.5% this year. That is slightly better than its old forecast that the unemployment rate would hold steady at 4.6%. Next year, the administration predicts the unemployment rate will edge up to 4.7%. Surprisingly the employment rate has remained strong even though the economy is showing signs of weakness. Analysts believe the reason has been that only housing and auto sectors were affected and did not affect other types of sectors.

Inflation directly affects the consumer prices. Inflation has been increasing this year due to higher prices for gas and other energy products. The administration expects consumer prices to rise by 3.2% this year. That's higher than the 2.6% increase previously projected. However the administration also expects consumer prices to rise by 2.5% in 2008 and edge down to 2.4% in 2009.

The White House's economic forecasts are issued twice a year. The administration's projections are in line with those offered by private analysts.

(Source: Yahoo Finance)