WASHINGTON, Aug 26: The US federal budget deficit will rise to a record $480 billion in fiscal year 2004, the nonpartisan Congressional Budget Office predicted on Tuesday.

The figure was slightly higher than the $475 billion gap predicted by the White House for the fiscal year starting October 1.

But the CBO said the deficit could top $500 billion with supplemental budget requested expected for reconstruction in Iraq.

The CBO said the deficit would total $401 billion in the current fiscal year, which ends September 30. That figure would be the largest ever in dollar terms but smaller than the deficits of the 1980s as a percentage of gross domestic product. The figure represents 3.7 per cent of US economic output.

Over the next decade, the CBO expects shortfalls to begin declining after 2004, posting a cumulative deficit of $1.397 trillion between 2004 and 2013.

The official forecast, however, assumes that recent tax cuts scheduled to expire in coming years won’t be extended.

Meanwhile, according to a survey, US consumers grew more optimistic about the economic outlook in August, rising to a level of 81.3 from 77 in July.

The Conference Board said its survey shows consumers, whose confidence eroded last month, believe economic conditions are improving.

Among components of the overall index, the expectations index surged to 94.4 in August from 86.3, but the present situation index dipped to 61.6 from 63.

“The welcome bounceback in confidence this month was entirely due to consumers’ increasing optimism about the future,” said Lynn Franco, research director at the Conference Board.

“However, continued optimism will depend on positive developments in the labour market.”

The index, based on a survey of 5,000 households, showed consumers believed the economy would be better in the coming six months.—AFP