The 2.7% pace "is a good solid growth rate, especially in that we have been hit with a pretty strong decline in the housing market," said Ed Lazear, chairman of the Council of Economic Advisers.
The forecast is more optimistic that the outlook from many private economists and the latest revised projections from the Federal Reserve, which earlier this month cut its outlook for gross domestic product growth to a range of 1.8% to 2.5%.
The White House however "projects continued solid economic growth and labor market performance," according to a statement from the president's Council of Economic Advisers.
Lazear said the housing slump "has been more pronounced than we had expected" earlier this year, accounting for much of the downward revision. He said another factor was a lower revised estimate of growth in previous years, suggesting overall productivity would be lower than anticipated. But Lazear said the highly publicized credit problems "have not made it into the real economy" so far. That is because companies "still have plenty of cash flow, so they still have cash in order make investments," he said.
A Commerce Department report released earlier on Nov. 29 showed the economy surged at a revised 4.9% pace in the third quarter despite the impact of credit and housing ills. But many economists see a much slower pace and some say a recession is possible in the coming quarters.
"While the difficulties in housing and credit markets and the effects of high energy prices will extract a penalty from growth, the U.S. economy has many strengths and I expect the expansion to continue," said Treasury Secretary Henry Paulson . "The U.S. economy remains broadly healthy -- the unemployment rate is low, core inflation is contained, and strong foreign growth is boosting exports."
Copyright Agence France-Presse, 2007
