The U.S. economy will continue to expand in 2007 and beyond, although the pace of expansion is projected to slow somewhat from the stronger growth of recent years, the White House said on Monday in an annual economic report.

In 2006, the expansion of the U.S. economy continued for the fifth consecutive year, said the report, which was written by the Council of Economic Advisers and endorsed by President George W. Bush.

Economic growth was strong, with real gross domestic product( GDP) growing at 3.4 percent during the four quarters of 2006, up from the 3.1 percent pace in 2005, the report said.

"This strong economic growth comes in the face of numerous headwinds and resulted from the inherent strengths of the U.S. economy and pro-growth policies such as tax relief, regulatory restraint, and opening foreign markets to U.S. goods and services, " it said.

On the inflation front, energy prices fell substantially towards the end of the year, allowing overall consumer prices inflation to moderate in 2006; however, price inflation increased for goods and services other than food and energy, it said.

The report said that labor markets continued to strengthen, with the unemployment rate descending to 4.5 percent in the fourth quarter, and payroll job growth averaging 187,000 per month.

The unemployment rate is projected to edge up slightly in 2007, while remaining below 5 percent, said the report.

Real GDP growth is projected to continue at around 3 percent in 2008 and thereafter, while the unemployment rate is projected to remain stable and below 5 percent, the report said.

The annual report overviews the nation's economic progress and is transmitted to Congress no later than 10 days after the submission of the Budget of the U.S. Government.

The Bush administration submitted its budget for 2008 fiscal year to Congress on Feb. 5, 2007.