In its twice-yearly economic forecast announcement, the White House said Wednesday it has lowered its 2007 GDP growth projection [see table] to 2.3% from 2.9%. The change is due primarily to the slowing of the economy to 0.6% in Q1, its worst rate in four years. The revised forecast reflects the effects of the housing slowdown; in 2006, the economy grew at a 3.1% rate. The White House reiterated its forecasts of 3.1% growth for both 2008 and 2009. The country's unemployment rate, which hit a six-year low of 4.6% last year, is now forecast to drop even further to 4.5% this year, a slight change from previous guidance of 4.6%. Economists say employment has stayed healthy even as the economy has slowed because the troubles have been confined primarily to the housing and automotive sectors. Because of rising prices of energy products, the White House has raised its CPI forecast to 3.2% from 2.6%. "Because of the robustness of the U.S. economy we've actually been able to survive high energy prices without a great deal of economic shock," said Edward Lazear, chairman of the White House's Council of Economic Advisers.
Sources: Press release, Wall Street Journal, MarketWatch, Bloomberg, Forbes
Commentary: Where is the US Economy Headed? • Return Without Risk? • What to Expect From US Investment Returns
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)
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