WASHINGTON, June 6: The White House on Wednesday trimmed its US economic growth forecast for 2007 to 2.3 per cent, while saying the slow pace of activity early this year would pick up as the year progresses.

The semi-annual forecast was cut from 2.9pc six months earlier, and is roughly in line with the outlook of most private economists in light of a sharp slowdown in the first quarter of the year.

The White House forecast, used for federal revenue and budget projections, indicated that the slowdown to a 0.6 per cent growth pace in the January-March quarter was likely to be transitory and that activity was showing signs of accelerating.

“A variety of indicators signal a faster-growing US economy for the rest of this year,” said Edward Lazear, chairman of President George W. Bush's Council of Economic Advisers.

“Unemployment remains remarkably low, business inventories are lean compared with sales, and now industrial production is on the rise.” The forecast calls for growth to strengthen to 3.1 per cent in both 2008 and 2009 and hold close to three per cent through 2012.

There was no quarter-by-quarter forecast for 2007, but Lazear said various indicators suggest a significant improvement starting with the second quarter.

“In order to get to 2.3 per cent (as an average for the year) you can figure out what it's going to be ... we are expecting the (pace for) rest of the year will be around three per cent.” The consumer inflation rate, according to the forecast, would be 3.2 per cent for 2007.

But Lazear said the “core” inflation rate, seen as a better indicator of trends by the Federal Reserve, would be substantially lower.

The headline inflation figure is seen as cooling to 2.5 per cent in 2008 and 2.4 per cent in 2009, and subsequently to 2.3 per cent.

The forecast projects in 2007 the economy will add 131,000 jobs per month and the unemployment rate will remain at a 4.5 per cent average for the year.

“This forecast shows strengthening growth, a healthy job market, and contained inflation,” said Treasury Secretary Henry Paulson in a White House statement.

The White House sees interest rates generally steady with the 10-year US Treasury bond average yield at 4.8 per cent, somewhat below the current yield.

The forecast is largely in line with most private forecasts. The Federal Reserve, however, has not modified its outlook issued in January for growth in the 2.5 to 3 per cent range. The International Monetary Fund in April pegged the US growth rate at 2.2 per cent.

Lazear said there has been no official recalculation of the impact of the economic forecast on the US budget deficit.—AFP