updated 11/21/2006 2:26:35 PM ET 2006-11-21T19:26:35

The White House on Tuesday lowered its forecast for economic growth this year and into 2008, reflecting the drag from the housing slump.

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Even with the downgrade, though, the Bush administration is predicting that the unemployment rate will turn out to be slightly lower than previously thought.

Under the administration’s new forecast, gross domestic product will grow by 3.1 percent, as measured from the fourth quarter of last year to the fourth quarter of this year. That’s down considerably from a projection of 3.6 percent made during in early June, but would still represent decent growth, especially given the strain on overall economic activity from the housing slump.

GDP measures the value of all goods and services produced within the United States and is the best measure of the country’s economic standing.

In 2007, the White House is now expecting the economy to grow by 2.9 percent — also lower than its previous forecast for 3.3 percent growth. And, in 2008, the White House is projecting a 3.1 percent growth rate, slightly less than its old forecast for a 3.2 percent growth rate.

The nation’s unemployment rate, which averaged 5.1 percent last year, is expected to dip to 4.6 percent this year — a slight improvement from the administration’s previous forecast for an unemployment rate of 4.7 percent this year.

For 2007, the administration expects the unemployment rate to hold steady at 4.6 percent and then edge up to 4.8 percent in 2008.

On the inflation front, consumer prices this year are now projected to rise by 2.3 percent, a sizable moderation from the administration’s earlier forecast for a 3 percent increase. The improvement comes as energy prices, which had surged to record highs in the early summer, have since calmed down, easing some inflation pressures throughout the economy.

Consumer prices are expected to tick up 2.6 percent in both 2007 and in 2008, the White House said. That’s a bit higher than its old forecast for a 2.4 percent rise in consumer prices in both 2007 and 2008.

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