The Obama administration’s budget predicts the U.S. economy will grow 2.7 percent this year, a forecast that’s more optimistic than those of private economists and Federal Reserve policy makers.
The White House raised the 2012 estimate from 2.6 percent in September. Economists forecast an expansion of 2.2 percent at an annual rate, according to the median of 79 estimates in a survey by Bloomberg News conducted from Feb. 3 to Feb. 9.
“Today, we are seeing signs that our economy is on the mend,” President Barack Obama said in a letter to Congress accompanying the 2013 budget proposal and the projections. “But we are not out of the woods yet. We need to finish the work we started last year by extending the payroll tax cut and unemployment benefits for the rest of this year.”
The White House’s growth forecast for 2013 was cut to 3 percent from 3.5 percent in September. The administration’s projections released today are based on information available as of November.
The president’s economic team has become more optimistic about the economy, leading them to lower their unemployment forecast. Obama’s advisers see employers adding 2 million jobs this year if administration policies are adopted, Alan Krueger, chairman of the White House Council of Economic Advisers, said in a statement Feb. 8.
That may bring the unemployment rate closer to 8 percent by the November election, Krueger said, while the numbers released today foresee an average rate of 8.9 percent this year. Krueger called the November-based predictions, which also forecast an 8.6 percent jobless rate for 2013, “stale and out of date.”
Unemployment last month fell to 8.3 percent, the fifth consecutive decline.
“While concerns lingered over the financial developments in Europe and the risk they posed to the U.S. economy, the pace of real GDP growth increased in the second half” of last year, the White House said in a statement.
The White House projections released today call for GDP growth of 3.6 percent in 2014 and 4.1 percent in 2015. They foresee the jobless rate dropping to 8.1 percent in 2014 and 7.3 percent in 2015.
Federal Reserve policy makers on Jan. 25 forecast the U.S. economy would grow between 2.2 percent and 2.7 percent this calendar year, while the International Monetary Fund estimates a 1.8 percent increase.
In today’s budget report, the administration projected the consumer price index would rise 2.2 percent this year, 1.9 percent in 2013 and 2 percent the following year.
Yields on 10-year Treasury notes are expected to be 2.8 percent this year, 3.5 percent in 2013 and 3.9 percent the following year, according to the projections released today. The yield was 1.96 percent at 11:04 a.m. today in New York.
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