LONDON -- High gasoline prices, government budget cuts and weaker-than-expected consumer spending caused the economy to grow only weakly in the first three months of the year.

The Commerce Department estimated Thursday that the economy grew at an annual rate of 1.8 percent in the January-March quarter. That was the same as its first estimate a month ago.

Consumer spending grew at just half the rate of the previous quarter, and a surge in imports widened the U.S. trade deficit. Most economists think the economy is growing only slightly better in the current quarter as consumers remain squeezed by gas prices, scant pay increases and a depressed housing market.

Analysts estimate that growth has accelerated slightly to around 2.5 percent in the current quarter. For the entire year, they think the economy will grow around 3 percent, which would be little changed from the 2.9 percent growth in 2010.

Growth is expected to improve modestly in the second half of 2011 as stepped-up hiring helps stimulate consumer and business spending. Companies are also benefiting this year from a tax break that lets profitable businesses write off large capital expenditures right away rather than gradually.

Economists caution that their brighter outlook could be derailed if oil prices head higher or if financial markets are jolted by Europe's debt crisis or a failure by Congress to raise the government's borrowing authority this summer.

Sign up for our new business newsletter

We're starting a weekly newsletter about the business stories that are shaping Charleston and South Carolina. Get ahead with us - it's free.


"I think consumers will hang on and start to do their part to lift the economy," said Mark Zandi, chief economist at Moody's Analytics. "The job market is improving, and more job growth means more income growth and that will help spending."

Still, a Labor Department report Thursday suggested that the job market remains sluggish. The government said more people applied for unemployment benefits last week, the first increase in three weeks.