Sales at department store Macy's have fallen

The country will see growth of about 2.7% despite the housing slump and credit crunch, the annual Economic Report Of The President said.

However the report did warn that the troubles could dent growth.

Last week a $167bn economic stimulus package was approved by the Senate and House of Representatives.

The plan, which includes a series of tax rebates, is aimed at boosting the economy and avoiding a recession.

The Federal Reserve has slashed its key interest rate to 3% as it tries to ensure economic momentum.

Like other central banks, it has also pumped hundreds of millions of dollars into money markets to boost liquidity.

Credit crunch

"Economic growth is expected to continue in 2008," the report said

"Most market forecasts suggest a slower pace in the first half of 2008, followed by strengthened growth in the second half of the year."

President George W Bush said that the annual report indicated "that our economy is structurally sound for the long term and that we're dealing with uncertainties in the short term".

The report, which some are seeing as too upbeat, predicts that annual growth in 2009 will accelerate to 3%.

Figures released last month showed that US economic growth fell sharply in the last three months of 2007 as the credit crunch took effect.

The economy grew at an annual rate of just 0.6% from October to December, the Department of Commerce said.

In the previous three months, between July and September, the economy was growing at an annual rate of 4.9%.

The slowdown was triggered by a slump in building activity, which fell by 16.9%, the biggest fall in 25 years, as housing prices collapsed.