Experts forecast robust economy

By Martin Crutsinger
Associated Press

WASHINGTON — The economy appears headed for a banner year, despite a springtime spike in energy prices and a recent increase in interest rates.

In fact, many analysts are forecasting that the overall economy, as measured by the gross domestic product, will grow by 4.6 percent or better this year, the fastest in two decades.

There were strong 4.5 percent growth rates in 1997 and 1999, when Bill Clinton was president and the country was in the midst of a record 10-year expansion.

But if this year's growth ends up a bit faster than that, it will be the best since the economy roared ahead at a 7.2 percent rate in 1984, when another Republican president — Ronald Reagan — was running for re-election.

"We are moving into a sweet spot for the economy, with interest rates not too high, jobs coming back and business investment providing strength," said Diane Swonk, chief economist at Bank One in Chicago, who is predicting GDP growth of 4.8 percent this year.

President Bush is highlighting the improving economy at every opportunity, while Democratic challenger John Kerry has focused on what he calls a middle-class squeeze of rising health and tuition costs and laid-off workers forced to take lower-paying jobs.

Who will win on the all-important pocketbook issues? Economists aren't sure.

"It is unclear whether voters will remember the past year and the better jobs created during that period, or the past four years," said Mark Zandi, chief economist at Economy.com.

"It will be a close call, and that is one of the reasons the election could be so close."

Assessing the economy at midyear, most private economists are sticking with the optimistic forecasts they had six months ago, even though inflation, driven by surging energy prices, rose higher than expected and the Federal Reserve started raising interest rates last month.

"We are looking for a darn good year, despite the fact that we had a big jump in oil prices and interest rates are going up faster than people thought would occur," said David Wyss, chief economist at Standard & Poor's in New York.