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US Economic Growth Slows

   Jim Randle  April 28, 2011

   U.S. economic growth slowed in the first three months of this year, as
   energy prices rose and state and local government spending fell. But
   many experts expect growth to recover later this year.
   The U.S. Commerce Department said Thursday that the U.S. gross domestic
   product grew at a 1.8 percent annual rate during the first quarter.
   That is sharply lower than the 3.1 percent annual rate of expansion
   seen in the last three months of 2010.
   Economists say rising gasoline prices hurt the growth rate. When
   consumers have to spend more money on energy, they have less to spend
   on everything else. Consumer spending drives about 70 percent of all
   U.S. economic activity, so lower spending cuts demand and growth.
   The chief financial economist of the Bank of Tokyo-Mitsubishi, Chris
   Rupkey, sees signs that personal spending and business investment will
   rebound and bring growth back up.
   "The heart and soul of GDP, consumer spending, is at 2.7 percent,
   stronger than it looked a month ago. And business capital spending is
   still strong at 11.6 percent," he said.
   Rupkey spoke on the Bloomberg financial news service.
   Officials at the U.S. central bank have said they expect the higher
   gasoline prices to be a temporary problem, and predict U.S. economic
   growth will return to around 3 percent later this year.
   White House economic advisor Austan Goolsbee says the administration
   has helped growth with tax cuts and incentives for business investment.
   He says faster growth is needed to replace the millions of jobs lost in
   the recession.
   There was discouraging news on the issue of jobs Thursday, as the
   number of Americans signing up for unemployment compensation rose
   25,000 to reach a total of 429,000.
   That is higher than the number seen in a healthy job market, but well
   below the number seen at the worst of the recent recession.
   Economist Rupkey says the weekly jobless claims will have to drop if
   economic growth is to improve. "We need to see initial unemployment
   claims fall sharply below 400,000 in coming weeks to make sure the
   economy is not slowing due to this latest headwind of higher gasoline
   prices," Rupkey said.
   GDP growth was also hurt by the lingering effects of the recession. The
   economic slowdown hurt the tax revenue collected by state and city
   governments, forcing them to cut budgets, spending, and jobs.
   Economists and investors watch the GDP closely because it is the
   broadest measure of the economy, and accounts for all the goods and
   services produced in the country.