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US GDP growth slows to 1.8%, surprise jump in jobless rate

29 April 2011 08:06 (UTC +04:00)

Baku - APA-Economics. US economic growth braked sharply in the first quarter as higher food and gasoline prices dampened consumer spending, and sent a broad measure of inflation rising at its fastest pace in 2-1/2 years.

Another report on Thursday showed a surprise rise in the number of Americans claiming unemployment benefits last week, which could cast a shadow on expectations for a significant pick-up in output in the second quarter. Growth in gross domestic product, a measure of all goods and services produced within US borders, slowed to a 1.8% annual rate after a 3.1% fourth-quarter pace, the Commerce Department said.

Growth in the first quarter was curtailed by a sharp pull back in consumer spending, which expanded at a rate of 2.7% after a strong 4% gain in the final three months of 2010. Rising commodity prices meant the consumers , which drive about 70% of US economic activity, had less money to spend on other items. The report also underscored the pain that strong food and gasoline prices are inflicting on households. A broader measure of inflation, the personal consumption expenditures price index, rose at a 3.8% rate, its fastest pace since the third quarter of 2008, after increasing 1.7% in the fourth quarter. The core index, which excludes food and energy costs, accelerated to a 1.5% rate, the fastest since the fourth quarter of 2009, from 0.4% in the fourth quarter.

The core gauge is closely watched by Fed officials, who would like it at around 2%. Still, economists expect consumer spending to trend higher in the second quarter, mostly on the belief gasoline prices will not rise much above $4 a gallon on average.