2005 U.S. Forecasts: Good, Pretty Good And Less Than Good

By John S. McClenahen During the past week, the White House, a private forecasting firm and a well-known securities firm have published U.S. economic growth forecasts for 2005. They range from good (the White House's) to less than good (Merrill Lynch & Co.). The Bush Administration's forecast, prepared by the President's Council of Economic Advisers, the White House Office of Management & Budget, and the U.S. Treasury Department, projects 3.5% real growth in U.S. GDP next year. The forecast "demonstrates that the substantial tax relief passed in President Bush's first term, together with expansionary monetary policy, provided economic stimulus and put the economy on the road to recovery and subsequent expansion," asserted John W. Snow, the Treasury Secretary. Global Insight, a Waltham, Mass., economic forecasting firm, expects real GDP growth in the range of 3% to 3.5% in 2005. "In the face of higher oil prices, gradually rising interest rates, and an end to [earlier] tax cuts, a 'downshift' in U.S. growth is already underway," noted Global Insight. "This deceleration, though, is probably not the beginning of a more dangerous downturn," it stressed. Merrill, whose corporate symbol is a bull, is the bear of this forecasting trio. Merrill is staying with its most recent projection of just 3% GDP growth in 2005. " . . . No matter how you slice it, the economy will moderate in the coming year," said David A. Rosenberg, the firm's chief North American economist. " . . . We have the economy growing slightly below potential, which means that core inflation will tend to go down, not up; and the unemployment rate goes up, not down.

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