WASHINGTON, July 30: President George W. Bush said on Wednesday he saw “hopeful signs” the US economy is picking up speed, and reasserted his faith in massive tax cuts despite a bulging budget deficit.

“We are beginning to see hopeful signs of faster growth in the economy, which, over time, will yield new jobs,” he told a news conference in the White House Rose Garden.

Most economists believe the economy would grow over the next 18 months, he said.

Hopes for economic recovery have been boosted by figures for June showing retail sales rose 0.5 per cent, groundbreaking on new homes surged 3.7 per cent, and industrial production rose 0.4 per cent.

“Yet the unemployment rate is still too high. And we will not rest until Americans looking for work can find a job,” Bush said.

The US unemployment rate shot up to a nine-year high of 6.4 per cent in June as businesses axed 30,000 jobs. Many analysts expect the rate to edge higher when July figures are released on Friday.

The weak labour market appears to be eroding consumer confidence, a key ingredient in spending, according to a closely tracked survey released on Tuesday by the Conference Board.

But Bush said a 350-billion-dollar tax cut package that became effective July 1 would help the economy, rejecting a suggestion that it might be time to pursue a different policy.

Tax cuts were only partly to blame for the new White House forecast for a record 455-billion-dollar budget deficit in the current fiscal year and another 475-billion-dollar shortfall next year, he said.

“Part of the deficit, no question, was caused by taxes: about 25 per cent of the deficit,” Bush said.

But 50 per cent of the gap was caused by a lack of revenues during weak economic growth and 25 per cent by extra spending on the “war on terror,” he said.—AFP