Official figures show that US economic growth slowed by more than expected in the first quarter of this year as higher food and petrol prices dampened consumer spending.
But economists believe the pull-back in output, which was also the result of harsh winter weather, a widening trade gap as well as weak government spending, will probably be fleeting as the country's labour market is improving.
US gross domestic product grew at an annual rate of 1.8% after a 3.1% fourth-quarter pace, the Commerce Department said. Economists had expected 2% growth.
The Federal Reserve last night acknowledged the slowdown in first-quarter growth, describing the recovery as proceeding at a 'moderate pace'. This was a slight step back from a statement in March when it said the economy was on a 'firmer footing'. It trimmed its growth estimate for 2011 to between 3.1% and 3.3% from a 3.4% to 3.9% January projection.
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 households that drive about 70% of US economic activity had less money to spend on other items. A broader measure of inflation, the personal consumption expenditures price index, rose at a 3.8% annual rate - its fastest pace since the third quarter of 2008.
The core index, which excludes food and energy costs, accelerated to a 1.5% rate - the fastest since the fourth quarter of 2009. The core gauge is closely watched by Fed officials, who would like it around 2%.
In the first quarter, growth was also curbed by the trade deficit as a need for businesses to rebuild inventories sucked in imports. Export growth slowed. A widening trade deficit weighs on GDP growth because it shows more US demand being satisfied by overseas production.
Re-stocking by businesses picked up pace, with inventories increasing $43.8 billion after a $16.2 billion rise in the fourth quarter. Business spending on equipment and software gained pace from the previous quarter, but government spending contracted at its fastest pace since the fourth quarter of 1983. Home building made no contribution, while investment in non-residential structures dropped at its quickest pace the fourth quarter of 2009.
