Moderating Economic Growth Is Predicted to Bounce Back

The U.S. economy will slow down slightly as the once-surging housing market cools, but overall growth will soon bounce back, White House economic advisor Al Hubbard said Thursday.

Hubbard, director of the National Economic Council, told reporters that he agreed with Federal Reserve officials who were predicting moderating gross domestic product growth.

“We’re predicting [third-quarter] GDP growth in the 1s or low 2s [percentage range],” Hubbard said, but he added that this probably would be a “one-quarter or two-quarter event.” Economic growth for the just-ended third quarter will be reported Oct. 27.

“We think for the year it’ll be around 3%,” he said.

Hubbard’s estimates are similar to those of several private economists.

President Bush, aiming to help Republicans in their fight to keep control of Congress in the November elections, has been touting his previous tax cuts as a major campaign theme and says the reductions have bolstered the U.S. economy.

Bush plans to underscore that message in a speech today at a FedEx Corp. facility in Washington, after the release of the Labor Department’s report on U.S. job growth in September.

Republicans hope that their prospects will be helped by a drop in gasoline prices after a surge this summer above $3 a gallon. But Hubbard said he hoped to see oil prices head even lower.

“Who would have thought we would think $58 or $59 [per barrel] oil was low?,” Hubbard said. “The president is not happy with $59 oil. He would like it to be significantly lower.”

Although the Dow Jones industrial average this week hit a record high, some sectors of the economy are struggling.

Hubbard’s comments came as a survey released Thursday showed optimism about the economy was down among the nation’s small to mid-size businesses as they have been hit with higher energy prices.

PNC Financial Services Group’s semiannual survey of small- and middle-market business owners showed that the economic outlooks of a third of the 501 respondents were not at all optimistic. That compares with 23% surveyed in April.

It was the lowest reading on business-owner optimism since PNC began taking the survey in 2003.

Meanwhile, a government report Thursday said that new claims for jobless aid fell by a bigger-than-expected 17,000 last week to the lowest level since mid-July, but that the four-week average of claims changed little.