(Bloomberg News) The U.S. economy grew at a slower pace than forecast in the first quarter as government spending declined by the most since 1983.

Gross domestic product rose at a 1.8% annual rate from January through March after a 3.1% pace in the last three months of 2010, the Commerce Department said today in Washington. Economists projected 2% growth, according to the median estimate in a Bloomberg News survey.

To keep spurring the expansion, Federal Reserve policy makers said yesterday they'll complete their $600 billion round of stimulus through June. While slower than the previous three months, a reflection of higher gasoline prices, consumer spending climbed more than projected in the first quarter.

"We've sputtered a bit here, especially coming off a relatively strong fourth quarter," said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who accurately forecast first-quarter growth. Even with the higher costs for fuel and food, "consumers are going to continue to spend. Growth should pick up toward the 3% level" later this year, he said.

GDP estimates from 80 economists surveyed by Bloomberg ranged from 0.5% to 3.5%. The first-quarter pace was the slowest since April through June of last year. For all of 2010, the world's largest economy expanded 2.9%, the most in five years, after shrinking 2.6% in 2009.

More Claims

New applications for jobless benefits unexpectedly rose last week to the highest level in three months. Unemployment insurance claims jumped by 25,000 to 429,000, the Labor Department said. The government anticipates a drop in unadjusted claims during the week leading up to the Easter holiday, something that didn't happen this year, a Labor Department spokesman said.

Consumer confidence in the U.S. fell last week for the first time in a month as rising gasoline prices hurt household finances, another report showed. The Bloomberg Consumer Comfort Index decreased to minus 45.1 in the period ended April 24, the lowest level since the end of March, from minus 42.6 the prior week. Measures of personal finances and buying climate dropped, indicating households may limit purchases as fuel costs rise.

Stocks were little changed after the reports and Treasury securities rose. The Standard & Poor's 500 Index was at 1,355.22, down less than 0.1%, at 9:52 a.m. in New York. The yield on the benchmark 10-year Treasury note, which moves inversely to prices, fell to 3.32% from 3.36% late yesterday.

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