US economic growth slows as inflation surges

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US economic growth slows as inflation surges

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US economic growth slowed sharply in the first three months of this year.

Consumer spending was down as higher food and fuel prices sent a broad measure of inflation – the personal consumption expenditures price index – to 3.8 percent, its fastest pace in two and a half years.

Output was also held back by harsh winter weather, as well as the biggest drop in US government spending in more than 27 years.

GDP growth slowed to a 1.8 percent annual rate after having picked up to 3.1 percent in the fourth-quarter of last year.

The weak growth underscores why Federal Reserve Chairman Ben Bernanke said on Wednesday that interest rates will stay low “for an extended period”.

The Fed trimmed its growth estimate for 2011 to between 3.1 and 3.3 percent from the 3.4 to 3.9 percent projection it made in January.

Another report released at the same time as the GDP figures showed a unexpected rise in the number of Americans claiming first time unemployment benefits last week.

They jumped 25,000 to a seasonally adjusted 429,000 last week, there is need to the cautious. Claims were the highest since late January and economists had expected them to slip to 392,000.