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Last Updated: Monday, 13 February 2006, 23:01 GMT
Bush advisers see fast US growth
US President George W Bush
The US economy is the world's number one
The US economy is entering a period of "sustained expansion", a report by the president's Council of Economic Advisers has predicted.

Growth is set to accelerate this year, while inflation and unemployment rates are both declining, they said.

The advisers added that the ballooning trade deficit also should come down.

President George W Bush says his policies have helped the US weather the effect of killer hurricanes and record crude oil prices.

'Ingenuity and hard work'

"The economy has shifted from recovery to sustained expansion, having absorbed the effects of the Gulf Coast hurricanes and large increases in energy prices in 2005," the advisers said.

The annual report lays out the economic policies and goals of the White House.

"The US economy continues to demonstrate remarkable resilience, flexibility and growth," President Bush wrote in an introduction to the report.

"Our economy's fundamental strength comes from the ingenuity and hard work of our workers," he added.

US car worker
US companies and consumers are helping to underpin growth

The economy is set to expand by 3.4% this year - up from 3.1% in 2004 - and by 3.3% in 2007, the advisers predicted.

At the same time, the unemployment rate probably will fall to 5% this year, down from an average of about 5.1% in 2005, they said.

Inflation also should decline, with consumer prices expected to rise by about 2.4% this year and the next.

Price growth has been reined in by a series of interest rate rises that have pushed up borrowing costs from their 45-year low of 1% to the current 4.5% level.

'Work tirelessly'

Ben Bernanke, the new head of the Federal Reserve, was a member of the Council of Economic Advisers before moving to take over from Alan Greenspan as chairman of the central bank.

Referring to China and concerns that it was keeping its currency undervalued to boost exports, the advisers said: "Greater exchange-rate flexibility would provide China with a useful policy tool to help stabilise its business cycle."

It also would "help China to reorient its future growth away from net exports and toward higher domestic demand", they said.

The US trade deficit was a record $725.8bn in 2005. The shortfall with China totalled $201.6bn.

President Bush said: "My administration will continue to work tirelessly to open markets and knock down barriers to free and fair trade so that American farmers and workers can compete on a level playing field worldwide."

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