First-Quarter Growth Comes Up Weak

U.S. economic growth was weaker than expected in the first quarter, as consumers were distracted by the prospect of war and companies continued to be stingy in the face of flailing demand.

The Commerce Department said first-quarter gross domestic product, the value of all goods and services produced in the U.S., rose at a 1.6% annual rate in the year's first three months. That's up from the fourth quarter's 1.4%, but short of economists' expectations for growth north of 2%.

"The economy isn't terribly weak, but inflation was higher than expected because of a rise in energy prices in the period, which dampened the adjusted numbers," said Gary Thayer, chief economist at A.G. Edwards & Sons. Thayer predicts economic activity will grow by a 3.2% annualized rate in the fourth quarter.

The GDP report is the first of three that the Commerce Department will issue about the first quarter, and it could be revised before the final number is released.

War with Iraq caused oil prices to hit a 12-year high in March. The GDP price deflator, a gauge of inflation tied to the report, grew at a 2.5% annual rate in the first quarter, from 1.8% the previous period and above the 2% economists had expected.