updated 9/11/2006 11:42:25 AM ET 2006-09-11T15:42:25

The economic expansion, which began in late 2001, still has staying power although growth will be sluggish through the rest of the year, business economists predict.

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The forecast released Monday by the National Association for Business Economics, or NABE, has gross domestic product growing at a 2.6 percent annual rate in both the current July-September quarter and in the final three months of the year.

The new projections are weaker than previous forecasts that called for the economy to expand at a 3.1 percent pace in the third quarter and then a 3 percent pace in the fourth quarter.

“Growth is not as robust ... but the economy is by no means going dormant,” said Carl Tannenbaum, chief economist at LaSalle Bank and president-elect of NABE.

“While the NABE outlook is less sanguine than it was when we last polled in May, our panel sees only a one-in-four chance the current expansion will end before the end of next year,” he said.

The economy has slowed as consumers have tightened their belts under the toll of high energy prices and borrowing costs.

In the April-to-June period, GDP, the value of all goods and services produced in the United States, increased at a 2.9 percent pace. That marked a sizable slowdown from the first quarter’s 5.6 percent growth rate, the fastest spurt in 2½ years.

With the economy slowing, the Federal Reserve in early August halted a campaign that had steadily pushed interest rates up for two-plus years. That left a key rate controlled by the Fed at 5.25 percent.

NABE’s forecasters believe there will not be any more rate increases — either at the Fed’s next meeting Sept. 20 or through the rest of this year. In fact, the forecasters predict the Fed will cut rates next year.

For all this year, the economy is expected grow by 3.4 percent, the NABE forecasters said. That’s slightly less than its previous estimate of 3.5 percent growth. If proved correct, the new projection still would be an improvement from the 3.2 percent growth logged last year.

Next year, though, the forecasters expect the economy to lose some steam and expand by 2.7 percent That new forecast also is down from a previous forecast of 3.1 percent growth for all of 2007.

The forecasters believe inflation will turn out to be higher this year than previously thought.

Consumer prices now are expected to rise by 3.6 percent this year, up from a previous forecast of a 3 percent rise. Last year, consumer prices went up by 3.4 percent, the most in five years.

Next year, consumer prices should moderate, rising by 2.6 percent, the forecasters said. Yet, that is still up from a previous forecast of a 2.4 percent rise in 2007.

The nation’s unemployment rate, which averaged 5.1 percent in 2005, should drop down to 4.7 percent this year, the NABE forecasters said. Next year, however, the jobless rate is expected to edge up to 4.9 percent.

The forecasters ranked high energy prices as the biggest risk to the economic expansion. Still there also were some concerns expressed about a sharper-than-expected slowdown in the housing market triggering a drop in home prices in many markets. Such a scenario could spell trouble for the overall economy.

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