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WASHINGTON — Treasury Secretary Paul O’Neill, citing continued strong demand in such key sectors as autos and housing, predicted on Thursday that a $40 billion flood of tax rebate checks this summer will give the economy a needed boost that should carry into next year. 

Meeting with reporters prior to weekend talks in Rome on the global economy, O’Neill’s assessment of the U.S. economy was more upbeat than many private economists, who are still worried that the country is in danger of falling into a recession. 

O’Neill said while some industries, notably telecommunications and computers, were experiencing significant weakness, he “took comfort” from the fact that housing sales and auto sales have remained strong, despite the overall slowdown. “We have real strength in our economy and we are bouncing around in narrow positive territory,” O’Neill told reporters at a Treasury news conference. 

He said growth should be aided further in the next 2.5 months as the government begins mailing out $40 billion in tax refund checks, the first wave of the $1.35 trillion tax legislation passed by Congress earlier this year. 

He said this infusion of cash into consumers’ pockets “will give us a bounce and that bounce will carry forward into next year.” 

“I am confident that the U.S. economy will move to a higher growth rate later this year,” O’Neill said. “We are thus doing our part to contribute to strong and stable growth worldwide.” 

O’Neill will deliver an assessment of the U.S. economy’s prospects when he meets on Saturday for discussions with finance ministers from the world’s seven richest industrial countries – the United States, Japan, Germany, France, Britain, Italy and Canada. O’Neill will also hold private discussions with Russian economic officials in preparation for a trip he and Commerce Secretary Donald Evans will make to Russia later this month at the request of Bush, who is looking for ways to increase economic ties between the two nations. 

While some administration officials have expressed concerns that Europe and Japan must do their part to boost their own lagging economies to support the U.S. recovery, O’Neill sidestepped any direct criticism of other nations. 

He did say he hoped that Japanese Finance Minister Masajuro Shiokowa will be able to discuss a timetable for which his government plans to implement an ambitious economic reform program aimed at lifting the world’s second largest economy out of a decade of weak growth. 

Speaking of both Japan and Europe, O’Neill said, “Europe and Japan are very big and important and they can play a locomotive role and it would be helpful for them to play a locomotive role” in restoring global growth prospects. 

O’Neill, who last week termed “off-the-wall” the European Union’s adverse review of $43 billion merger between General Electric and Honeywell International, was more circumspect in his comments on Thursday, saying that U.S. regulators focus more on the consumer impact of potential mergers, while Europeans worry more about the impact on other competitors. 

He said he did not believe the EU rejection of the merger would be a part of the formal discussions among finance ministers on Saturday but could be part of “gossipy chit chat” over lunch. 

O’Neill said that the administration’s push to overhaul the International Monetary Fund and the World Bank would be a major topic of discussion, saying he believed from earlier discussions that “most of the ministers are like-minded, directionally at least.” 

Efforts to crack down on money laundering and tax cheating will also be on the agenda for the finance meeting, which will be used to prepare the economic part of the agenda for this year’s economic summit which President Bush will attend in Genoa, Italy, on July 20-22. 

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