The Bush administration on Monday stuck to its prediction that the US would not face a recession in 2008. It claimed the economy had a “solid foundation” to guide it through the housing crisis and would be helped by a $170bn fiscal stimulus package later this year.

Edward Lazear, chairman of the White House Council of Economic Advisers, which released its annual report to Congress on Monday, said: “I don’t think we are in a recession right now, and we are not forecasting a recession. We are forecasting slower growth.”

Mr Lazear’s remarks are at odds with the view held by many top economists that the US economy is already contracting, based on recent gloomy data on employment and business sentiment, as well as continuing woes in the mortgage industry.

The White House acknowledged that “challenges” and “economic uncertainty” would lead to slower growth, particularly in the first half.

Overall, the Bush administration predicts the US economy will grow at a rate of 2.7 per cent this year – which is unchanged from earlier estimates – and 3 per cent in 2009.

On Wednesday, President George W. Bush is expected to sign legislation that will pump $170bn into the economy through a mix of tax rebates to consumers and incentives to businesses. The benefits of the fiscal stimulus package, agreed within a relatively short period of six weeks by Congress, are expected to kick in by the second half of 2008, as should the effects of January’s 125 basis point easing of monetary policy by the Federal Reserve.

“Americans should be confident about the long-term strength of our economy,” Mr Bush said. “But our economy is undergoing a period of uncertainty, and there are heightened risks to our near-term economic growth.”

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