THE United States economy slowed sharply in the first three months of this year as high gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.

The US Commerce Department yesterday said the economy grew 1.8 percent annually in the January-March quarter. That was weaker than the 3.1 percent growth for the October-December quarter. And it was the worst showing since last spring when the European debt crisis slowed growth to 1.7 percent.

Federal Reserve Chairman Ben Bernanke and other economists said the slowdown last quarter is a temporary setback. They generally agree that gas prices will stabilize and the economy will grow 3 percent in each of the next three quarters.

But gas prices are still going up. The national average yesterday was US$3.88 a gallon, up 30 cents from a month ago.

An inflation gauge in the report showed consumer prices rose last quarter at the fastest pace in nearly three years, with most of the increase coming from higher fuel costs.

Rising gas prices are draining most of the extra money that Americans are receiving this year from a Social Security payroll tax cut.

In the first quarter, consumers boosted spending by 2.7 percent. That was down from 4 percent in the prior quarter and was the weakest pace since last summer. Consumer spending is vital because it accounts for 70 percent of overall economic activity.

Pump prices were mostly blamed for the pullback, although harsh winter weather also kept people from shopping.

"All things considered, it could have been worse," said economist Paul Dales at Capital Economics. Even though consumers spent less, the pace of spending by historical standards is decent.

Winter storms also forced builders to delay construction projects, a big factor holding back overall economic activity. Builders cut spending on commercial construction by 21.7 percent annually, the deepest cuts since late 2009.