Administration lowers growth forecast

WASHINGTON --The White House on Wednesday lowered its forecast for economic growth this year even as it slightly upgraded its outlook for unemployment. Under the administration's new forecast, gross domestic product, or GDP, will grow by 2.3 percent as measured from the fourth quarter of last year to the fourth quarter of this year. That's down from a previous projection of 2.9 percent. The main reason for the downgrade: The first three months of 2007 got off to an extremely weak start. Economic growth at that time had skidded to nearly a halt, increasing at a rate of just 0.6 percent, the worst showing in more than four years. Federal Reserve chairman Ben Bernanke, the administration and private economists expect the economy will rebound in the months ahead.

Productivity down, but inflation restrained

WASHINGTON -- The productivity of American workers slowed sharply in the first three months of this year, but wage pressures eased as well, providing evidence that inflation is being restrained. The Labor Department reported that the amount of output per hour of work for nonfarm businesses rose at annual rate of 1 percent in the January-March quarter. That was the slowest advance since the third quarter of last year and was below the government's initial estimate that productivity rose at a 1.7 percent rate in the first quarter. Labor costs rose at an annual rate of 1.8 percent. That was up from an initial estimate of 0.6 percent growth in unit labor costs but was still lower than the 8.9 percent surge reported in the final three months of last year. While higher wages are good for workers, increases that outstrip the growth of productivity can trigger unwanted inflation as employers are forced to boost the cost of their products to meet their higher payroll costs.

European bank raises key interest rate

FRANKFURT, Germany -- The European Central Bank raised its key interest rate to the highest level in nearly six years on Wednesday amid steady growth and left the door open to further increases -- though it appeared in no hurry to move again. The widely expected increase will make everything from mortgages to auto loans more expensive for more than 317 million people in the 13-nation euro zone, which accounts for more than 15 percent of the world's gross domestic product. Even though inflation has been within the ECB's guidelines, president Jean-Claude Trichet said it raised its main rate to 4 percent from 3.75 percent because of the likelihood of higher prices. He cited concerns over oil prices and wage developments. Wage growth supports consumer spending -- a key factor in a region's economic health -- but a rapid, unchecked rise can fan inflation concerns. Even after Wednesday's decision, the ECB's key rate remains below those of the United States, at 5.25 percent, and Britain, at 5.5 percent.

Automakers object to higher fuel standard

WASHINGTON -- The heads of Detroit's auto industry asked Congress on Wednesday to reconsider a proposal to increase fuel standards that the automakers say could hurt their industry. The leaders of General Motors, Ford and the Chrysler Group discussed the impact of health care, trade and energy policies on their companies, and asked House and Senate leaders to look at alternatives to a proposed overhaul of Corporate Average Fuel Economy standards for vehicles. During a luncheon with Senate Democrats, it was evident they face hurdles. Sen. Byron Dorgan, D-N.D., noted the industry had resisted past increases and was now running advertising saying a Senate proposal would "take your pickup truck away." Rick Wagoner, General Motors Corp.'s chairman and chief executive, said the fuel economy program, developed in the mid-1970s, had failed to meet its goal of reducing gasoline consumption and oil imports.

Inventories causes gas futures to fall

NEW YORK -- Gasoline futures fell Wednesday after the government reported an unexpectedly large increase in gas inventories and a surprising decline in refinery utilization. Oil futures jumped when news broke that several thousand Turkish troops had crossed into northern Iraq to chase Kurdish guerrillas. Light, sweet crude for July delivery recovered from early losses and rose 35 cents to settle at $65.96 a barrel on the New York Mercantile Exchange. Gasoline futures for July dropped 1.69 cents to settle at $2.1904 a gallon on the Nymex. Retail gas prices also continued their downward track. The average national price of a gallon of gas slipped 0.8 cent overnight to $3.14, according to AAA and the Oil Price Information Service. Prices at the pump peaked at $3.227 a gallon last month.

-- From wire reports