A report released by the Commerce Department this morning revealed that the economy grew at a 1.8% annualized rate in the first quarter. This modest growth rate is down significantly from 3.1% in last year’s final quarter.
A sharp decline in consumer spending was the primary driver behind the slow growth.
The Wall Street Journal explains:
The U.S. economy hit the brakes in the first three months of 2011 as higher prices, especially for gasoline and food, squeezed spending by Americans.
The data marked a setback for an economy still healing from a deep recession. High international oil prices have pushed gas costs beyond $4 a gallon in parts of the country. But the Federal Reserve and private-sector economists see the almost two-year-old recovery gaining momentum later in 2011. Fed Chairman Ben Bernanke Wednesday said the first-quarter slowdown would likely be temporary.
The Commerce Department said consumer spending, accounting for about 70% of demand in the U.S. economy, rose at a 2.7% rate in the first quarter, down from the 4.0% pace registered in the fourth quarter.
Adding to the disappointing news, new unemployment benefit claims rose last week. This is contrary to economist’s forecasts that predicted would continue to drop.
