Economic growth in the U.S. eased sharply in the first three months of the year as consumer spending was held back by surging food and gas prices, according to Bloomberg. On Thursday, the Commerce Department reported that gross domestic product in the U.S. grew at a seasonally adjusted rate of 1.8% in the first quarter of 2011, falling short of the 2% expansion that economists had forecast. The gain also failed to match the 3.1% increase posted in the last quarter of 2010 and marked the slowest rate of growth since the second quarter of last year. The weak data come on the heals of a lower forecast from the Federal Reserve for growth in 2011, which is down to 3.1% from 3.3% previously.
The slowdown was largely due to a smaller amount of household purchases, which rose at a 2.7% pace in the first quarter after gaining 4% in the last three months of last year. The slowing consumer spending comes as the labor market recovery shows signs of losing steam, and the Labor Department reported that new claims for unemployment benefits increased by 25,000 in the latest week, reaching 429,000, although the government anticipates a drop in claims over the Easter holiday. Additionally, the consumer comfort index from Bloomberg dropped to -45.1 in the week ending Apr. 24, which is the lowest level since March as inflation tied to consumer spending reached a 1.5% annual pace.