After economic growth accelerated in the fourth quarter of 2010, higher prices for gas and food combined with a weak jobs market and bad weather conditions, growth slowed in the first quarter of 2011.
According to Commerce Department data, the rate of economic growth for the first quarter was 1.8 percent, a decrease in growth from the the 3.1 percent rated for the fourth quarter of 2010. Consumer spending also narrowed its growth rate to 2.7 percent, down from 4 percent for the previous quarter.
The housing sector spending fell by 4.1 percent annualized rate for the quarter, contributed partially to bad weather, but also a sign of a continued struggle for recovery in the housing market.
State and local public-sector spending fell by 3.3 percent due to on-going budget problems. The contraction in public-sector spending could continue to be a drain the overall economy as efforts to address deficits and restructure spending could take some time to resolve.
However, Federal Reserve Chairman Ben Bernanke, speaking a news conference indicated that the Federal Open Market Committee (FOMC) still expects the economy to grow in the range of 3.1 to 3.3 percent in 2011. It is the first time that the FOMC held a public news conference following a committee meeting.
Inflation concerns were raised, fueled mostly by energy and food prices, by a 3.8 percent increase in consumer prices. However, when energy and food prices are removed, the rate of inflation was at 1.5 percent, within the range targeted by the Federal Reserve as necessary for a healthy recovery.
"Most of the factors that account for the slower growth in the first quarter appear to us to be transitory," Bernanke said.