US economy slams on the brakes

The world's biggest economy braked sharply in the first quarter of 2011, as American consumers were hit by higher food and petrol prices.

Official figures yesterday showed gross domestic product - a measure of all goods and services produced within US borders - slowed to a 1.8 per cent annualised growth rate from 3.1 per cent in the fourth quarter of 2010. Economists had been forecasting a reading of just over 2 per cent.

A separate report revealed a surprise rise in the number of Americans claiming unemployment benefits last week, which could cast a shadow on expectations for a significant pick-up in output in the second quarter.

On Wednesday, the chairman of the Federal Reserve, Ben Bernanke, warned that the struggling housing market would continue to weigh on the nation's economic recovery. The US central bank is now forecasting growth for 2011 to be between 3.1 per cent and 3.3 per cent, down from a previous projection of 3.4 per cent to 3.9 per cent.

GDP output during the first quarter was also held back by harsh winter weather, rising imports and the weakest government spending in more than 27 years.

Shehan Mohamed, an economist at the UK's Centre for Economics and Business Research, said: "(The] GDP release shows that growth in the US remains fragile, even as the Federal Reserve has developed a more hawkish stance in recent weeks."

Stephen Stanley, chief economist at Pierpont Securities, added: "The biggest factor was weather. It hurt consumption and construction. Higher gasoline prices took a bigger bite out of people's budget."

The figures came a day after it emerged that the UK economy had bounced back in the first three months of the year with modest quarter-on-quarter GDP growth of 0.5 per cent.