White House Lowers Economic Outlook for 2008

Because of trouble in the housing and credit markets, the Bush administration now forecasts that the real gross domestic product will grow by just 2.7 percent next year instead of its earlier 3.1 percent projection, Reuters reported.

California-based RealtyTrac Inc. announced that 224,451 foreclosure filings were reported nationwide in October, a 2 percent increase over September and 94 percent jump over October 2006. Forty-five states had an increase in foreclosure filings over last year.

One foreclosure was filed for every 555 U.S. households in October, the company announced.

However, the Commerce Department announced that the U.S. economy grew at a brisk 4.9 percent pace in the last quarter – the strongest performance in four years. The July through September GDP growth outpaced the government’s earlier 3.9 percent projection.

Stronger American exports and business inventory investments were the main reasons for the improvement, according to the Associated Press.

But the economy’s impressive performance isn’t expected to last through the current quarter.

Private economists have ratcheted down their economic growth forecasts in recent months as the housing market and ensuing credit crunch threaten to slow consumer and business spending, Reuters reported.

Allan Hubbard, the top White House economic adviser, said this week that U.S. recession risks had increased, although he put the chances at less than 50-50.

The White House acknowledged that rising food and energy prices have pushed up inflation, and raised its 2007 consumer price index forecast from 3.2 percent to 3.9 percent. However, the administration expects inflation to cool next year. For 2008, they estimated CPI at 2.1 percent, down from their prior forecast of 2.5 percent.

The White House’s twice-yearly economic forecast was still above Federal Reserve policymakers’ central projection of 1.8 percent to 2.5 percent real GDP growth for 2008. Real GDP is the rate of growth of the economy after subtracting inflation.