US economic growth slows to 1.8%

Higher petrol prices and severe weather curb US GDP growth to an annualised 1.8% in the first three months of the year The US economy slowed during the first three months of the year to an annualised rate of 1.8%, as higher petrol prices and severe weather curbed growth. Previous consensus forecasts had pitched growth at between 2% and 2.5% for the first quarter. A slower pace of growth was signalled by Federal Reserve chairman Ben Bernanke who predicted a sub-2% rate at his first press conference on Wednesday evening, but the commerce department figures were still greeted with dismay by many traders concerned at the outlook for the US economy. Figures showing jobless claims also unexpectedly rose added to the dismal picture. The S&P index of leading shares dipped 3 points, putting a temporary brake on an otherwise surging stock market. Gold climbed to a new high of more than $1,532 an ounce, while the dollar continued its long decline, made worse the previous day by widespread interpretation of Bernanke’s remarks as meaning interest rates would stay low for a prolonged period. Inflation surged to 3.8%, its fastest pace since the third quarter of 2008, after increasing 1.7% in the fourth quarter. The core index, which excludes food and energy costs, accelerated to a 1.5% rate, the fastest since the fourth quarter of 2009, from 0.4% in the fourth quarter. US job figures weak In another report, new weekly claims for jobless benefits jumped to 429,000 in the week to April 23, from 404,000 the prior week. William Larkin of Cabot Money Management said the injection of capital by the Federal Reserve under its quantitative easing programme had proved disappointing because it was expected to reap a higher growth rate. He said: “Jobless claims popped back above 400,000 again, and that’s been a psychological barrier. We had been on a nice trend with claims, but now we’re finding resistance, which calls into questions the jobs recovery.” He added: “GDP was a little on the light side, though there were positives and negatives in the report. But with the amount of injection of capital into the economy, you’d hope that we would be able to get above 2% growth. In the short-term this is bad for stocks and good for bonds.” Richard Bryant, head of treasury trading at MF Global Securities, argued that bond prices were spooked by the jobless figures more than the slight decline in GDP. He said: “The big surprise was that jobless claims were a little bit higher than people were looking for, a little bit higher than expectations, so the Treasury market is retaining the bid that it has demonstrated since yesterday afternoon. This data certainly supports the bid. GDP had no major surprises, the headline was a little bit weaker than expectations.” The downbeat US figures confirm a general slowdown in growth across the developed economies as the effects of fiscal stimulus policies wane and austerity measures take their place. In the US Treasury secretary Tim Geithner has maintained much of the federal stimulus put in place during the banking crisis, but has presided over large cuts by individual states, which must balance their budgets. Only Germany has maintained its robust growth, mainly on the back of exports to Asia, while France and Britain are unlikely to breach the 2% barrier. The UK government has estimated annualised growth at 1.5% to 2%, with a consensus hovering on or below 1.5%. US economy Economics United States Phillip Inman guardian.co.uk

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