Slow growth and rising prices raise fears of stagflation in US

04/28/2007

By Stephen Foley in New York
The Independent
Published: 28 April 2007


The US economy slowed more sharply than expected in the first three months of the year, and is growing at its weakest pace since 2003.

The latest quarterly GDP figure of 1.3 per cent was barely half the growth rate of the previous three months, and well below the 1.8 per cent that economists had been expecting.

But at the same time, prices data within the figures suggested swelling inflationary pressures that may crimp the Federal Reserve's ability to kick-start the economy through interest rate cuts.

The teetering American housing market continues to be the main culprit in the slowdown, with residential building activity sliding 17 per cent in the quarter. That was the sixth straight decline, and followed a fall of 19.8 per cent in the fourth quarter.

House prices are tumbling in many parts of the country and mortgage arrears are rising among the poorest Americans, prompting builders to scale back their development plans.

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