The White House, in a slightly more optimistic forecast, predicted Thursday the economy will log solid growth and that the nation's unemployment rate will dip lower this year.

The Bush administration forecast that the gross domestic product will grow by 3.6 percent, as measured from the fourth quarter of last year to the fourth quarter of this year. That is a better than its previous forecast of a 3.4 percent growth rate for this year.

The upgraded forecast comes despite a run up in energy prices and mostly reflects the big growth spurt recorded by the economy in the opening quarter of this year.

For all of 2005, the economy expanded at a 3.2 percent pace.

The White House continues to project good economic growth in 2007 and 2008, at 3.3 percent of 3.2 percent respectively. Those forecasts are unchanged from previous estimates.

The administration's new forecasts also predicted further improvement in the nation's unemployment rate, which had edged down to 5.1 percent by the end of last year.

The White House now expects the jobless rate for all of 2006 to drop to 4.7 percent, which is lower than its previous forecast of a 5 percent unemployment rate.

However, in 2007 the unemployment rate would inch up to 4.8 percent and to 4.9 percent in 2008, according to the new forecast. Still, that would be better than the old forecast, which had the jobless rates in 2007 and 2008 at 5 percent.

Inflation, however, is projected to turn higher this year than thought six months ago.

Consumer prices are expected to rise by 3 percent this year, up from a previous forecast of a 2.4 percent rise in consumer inflation. That higher inflation forecast reflects the big jump in energy prices seen this year.

Oil prices topped a record high of $75 a barrel in late April; they are now hovering above $69 a barrel. Gasoline prices, which have marched higher, are above $3 a gallon in some areas.

Inflation should calm down a bit over the next two years, rising by a more moderate 2.4 percent in 2007 and 2008, the White House said, the same as previously forecast.

Its economic forecasts are issued twice a year. The projections were mainly developed by a team of people from the White House's Council of Economic Advisers, the Treasury Department and the Office of Management and Budget.