Snow says economy growing well

LONDON (Reuters) – The U.S. economy will grow by about 3.5 percent this year as its recovery continues and expands, U.S. Treasury Secretary John Snow said on Wednesday.

"We are in a very good position to see this good recovery continue and expand with growth rates for ’06 that are in the 3.5 percent range for GDP and with strong job creation and with a pick up in compensation levels," he told BBC radio.

Snow said the United States remained committed to cutting the country’s budget deficit and was confident it would achieve goals set by President George W. Bush.

"We remain committed to bringing the deficit down, we are confident we will," Snow said.

The United States’ deficit in the fiscal year ending September 30 was $318.62 billion, down from a record $412.85 billion in the previous year, but still large enough to loom over mid-term elections this year.

"The president has said he wants to bring the deficit down to a level that will in effect cut it in half over his time in office for the last five years. That would bring it to a level which is below 2 pct of GDP, low by historical standards," Snow said.

He said inflation was subdued, a fact reflected by relatively low U.S. long-term interest rates, and that he did not really expect the economy to cool in 12-18 months time following a cycle of interest rate rises.

"And all of that I think against a backdrop of inflation well in check. So we are looking for continued very good performance from the American economy," Snow said.

"In the United States we are blessed that yes we do have strong consumer spending but we also have very strong capital goods investment," he told the BBC.