The Bush administration forecasts a strong U.S. economy in 2005, with inflation and unemployment expected to decline. The official projections were released Friday, on the heels of a two-day conference where President Bush pledged to cut the budget deficit and exercise fiscal discipline.
The Council of Economic Advisors says the world's largest economy will continue to grow in 2005.
Chairman of the council that advises the president, Gregory Mankiw, is optimistic about the direction of the U.S. economy. "The economy is in very solid shape. When I was a professor of economics, I told my students to keep an eye on three indicators of economic performance - GDP [Gross Domestic Product], inflation and the unemployment rate - and by all three measures the economy looks like it's very sound," he said.
GDP, or gross domestic product, is the value of all goods and services produced in the United States.
The White House expects the GDP to continue growing, but at a slower rate than this year. Growth is projected to slow to 3.5 percent in 2005, down less than half-a-percent from this year.
Inflation is expected to remain low, dropping to two percent as oil prices decline.
The forecast shows unemployment will average 5.3 percent in 2005, down from 5.5 in 2004. An average of 175,000 jobs will be added each month.
Mr. Mankiw says the White House is not alone in its prediction of a strong economy in 2005.
In fact, Senior Bank of America economist, Peter Kretzmer, says the picture may be even brighter that the administration predicts. "Well you know, my impression of their forecast is that it's actually quite a conservative forecast and I don't mean that in a political sense. I mean that in an economic sense. The forecast that the economy will grow three-point-five percent Q-4 over Q-4 [4th quarter 2004 to 4th quarter 2005] is actually almost half a percent lower than the Bank of America forecast. We're at 3.9 percent in 2005," he said.
Mr. Kretzmer says the growth rate in the United States, even at 3.5 percent, is outpacing the economic growth of some other developed nations. "The Japanese economy was growing faster than that early in 2004 but has now slowed well below that rate. Even the best assessments in Europe project somewhere around two percent growth," he said.
The economic forecast, prepared by the Council of Economic Advisers, the U.S. Treasury and the Office of Management and Budget, is used by the government to generate revenue and spending figures, as part of the budget process.