WASHINGTON (AP) - The United States economy has "tremendous potential to grow" without fueling inflation, the White House said Wednesday in a generally upbeat report to Congress even as officials said they were monitoring the effect of Mideast turmoil on oil prices, which could drive up consumer costs.
The annual report, prepared by President Barack Obama's Council of Economic Advisers, predicts a modest 1.4 percent increase in the Consumer Price Index this year. Still, that forecast does not take into account variables such as the continued unrest in the Middle East, particularly oil-rich countries such as Libya.
"Whenever there's unrest in this part of the world, there are going to be reactions in the markets," White House spokesman Jay Carney said. "Beyond that, the situation is fluid, and I don't want to speculate about where prices will go or any other potential things in the future. But we are obviously monitoring this carefully and we're concerned about it."
The relationship between oil prices and inflation has a mixed history. Price-per-barrel spikes have not directly correlated with inflationary jumps in the United States since the 1970s. What's more, the White House economic report shares the view of Federal Reserve Chairman Ben Bernanke that the current economy has significant slack - high unemployment, weak demand - to offset inflationary pressures.
The White House report is slightly more upbeat than president's 2012 budget released only earlier this month. The budget forecast growth in the nation's gross domestic product of 2.7 percent in 2011; the new report forecasts growth of 3.1 percent. The report states that the budget forecast did not incorporate the effect of the tax cuts passed by Congress during its lame-duck session in December
"Although the recession generated devastating job losses and an output decline of historic proportions, the economy is no longer on the brink of a depression," the report states. "Growth has resumed, jobs are returning, and unemployment is falling."
In other economic developments, Obama named leaders from business and labor to his newly created jobs and competitiveness council. Many of them had served in his previous economic recovery advisory board.
Among the members Obama announced Wednesday are AFL-CIO President Richard Trumka and Kenneth Chenault, the head of American Express. Obama also named Penny Pritzker, the finance chair for his 2008 presidential campaign, to the board.
The council is tasked with coming up with ways to promote economic growth and investment in U.S. businesses. Obama will lead the council's first meeting, scheduled Thursday at the White House.
Obama also filled a key vacancy on his Council of Economic Advisers, naming Carl Shapiro as a member. Shapiro is an economist in the antitrust division at the Justice Department.