White House trims growth forecast

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A slump in the US housing market has prompted the White House to revise down its forecasts for economic growth.

The Bush administration now expects gross domestic product (GDP) to grow by 3.1% this year rather than earlier forecasts of 3.6%.

Growth forecasts for 2007 were also clipped from 3.3% to 2.9%.

While the revision reflected a "slower than expected" housing sector, other parts of the economy remained strong, the Council of Economic Advisors said.

Recent figures from the commerce department showed the number of new homes being built in the US fell to six-year lows in October, while spending on new housing experienced a 17.4% annual fall.

Slowdown

The world's largest economy has slowed since the start of the year, partly as a result of a housing market slowdown but also as a result of rising interest rates.

Energy price increases have also taken their toll. However, a 20% drop in oil prices since August has helped moderate US inflation concerns.

"The economic forecast clearly reflects the fact that the US economy is moderating to more sustainable growth levels, firmer labour markets and steady inflation rates," Treasury Secretary Henry Paulson said.

The government now expects its key measure of inflation - the Consumer Price Index (CPI) - to grow by 2.3% in 2006 rather than the 3% it had predicted earlier this year.