The US economy grew at its softest pace in two years during the first quarter this year, slowing to a 3.1 per cent annual rate of expansion as consumers and businesses curbed spending in the face of rising prices, the Commerce department said on Thursday.The expansion in gross domestic product, which measures total output within US borders, was the weakest since a 1.9 per cent pace during the first quarter of 2003. It also was a surprisingly sharp deceleration from the 3.8 per cent rate registered in the fourth quarter of 2004.Wall Street economists had forecast first-quarter GDP would grow at a relatively more robust 3.6 per cent rate. Oil prices have continued to rise since the Q1 GDP data was compiled, and fears have grown they will feed into the broader economy, with many analysts expecting growth in the second quarter to be affected further.The softer-than-expected start to 2005 likely will boost expectations that Federal Reserve policy makers, who meet again next Tuesday to consider interest-rate strategy, will stick to a policy of smaller, gradual rate rises. There was evidence in the GDP report that price pressures are growing.A price index favored by Federal Reserve Chairman Alan Greenspan — personal consumption expenditures excluding food and energy products — gained at a 2.2 per cent annual rate, up from 1.7 per cent in the final quarter last year and the strongest for any period since a 2.6 per cent jump in the final three months of 2001.In financial markets, the dollar fell in value against other major currencies on the GDP data, while indications were that stock prices would suffer on concern that corporate profits might not be as healthy as hoped. Analysts noted that while first-quarter GDP growth slowed, it still represented an expanding economy. — Reuters
