White House sees strong GDP growth in 2022 despite additional

The White House sees more risks to U.S. economic activity in the months ahead thanks to rising prices and Russia’s invasion of Ukraine, but still expects healthy GDP growth in 2022.

A senior administration official told CNBC that the recent rise in energy and food prices — caused in large part by Moscow’s attack on its neighbor — and ongoing supply chain hiccups are two of few “additional” risks to U.S. GDP growth this year.

But despite the inflationary concerns, most economic data points to another strong year for the U.S. economy as measured by job gains, household savings and real income, the official said.

“We are facing real risks and some challenges,” the person said. “One risk is the war that Putin has started in Ukraine. That has real effects on the U.S. economy, largely through energy prices and food.”

But “when you put it all together, the U.S. economy is in a strong position, even as we face some additional risks in the months ahead,” the official said.

The official, speaking on the condition of anonymity to discuss private White House forecasts, said the administration was encouraged to see the International Monetary Fund estimate that the U.S. will see its gross domestic product grow 3.7% this year. That compares with forecasts of economic growth of 2.1% for Germany, 2.5% for South Korea and 3.7% for the United Kingdom.

The Russian economy, overwhelmed by a barrage of sanctions imposed by the U.S. and its allies, is expected to contract by 8.5%, according to IMF projections.

The remarks from the White House come as a growing number of economists tweak economic forecasts to include red-hot inflation, tapering growth from the Covid-19 rebound and a historically tight labor market.

President Joe Biden is sympathetic to those trends, the official said, and will continue to explore all viable options available to the Oval Office to quell prices.

Biden has blamed Russian President Vladimir Putin for the latest jump in U.S. inflation, which last month hit 8.5%, and has begun to refer to energy inflation as “Putin’s price hike.”

Data like that is part of the reason that investment bank Goldman Sachs told its clients earlier this week that it thinks there’s a 35% chance of a recession in the next two years.

In a note published Sunday, Goldman Chief Economist Jan Hatzius wrote that the main risk to continued economic growth stems from a tricky balancing act facing the Federal Reserve, the U.S. central bank.

He explained that the Fed, in charge of cooling inflation and maximizing employment, must now weigh that record level of job openings while also trying to keep a lid on wage and price acceleration.

In other words, the Fed must orchestrate what economists refer to as a “soft landing”: Control inflation with tighter monetary policy and higher interest rates without tipping the economy into recession.

“History suggests that this may be challenging, since large declines in the jobs-workers gap have…