Is the economy losing its mojo?

chart_gdp_042611.top.gif By Chris Isidore, senior writer


NEW YORK (CNNMoney) -- Inflation took a big bite out of the recovery in the beginning of the year, according to the latest forecasts, which have plummeted over the last several weeks.

In 2010, the economy seemed to be on firmer footing, finishing out the year with a 3.1% growth rate in the final three months, compared to the same period last year.

But a CNNMoney survey of economists predicts that the pace of growth slowed to just 2% in the first three months of this year. Only three weeks ago, expectations were for 2.7%, while some forecasts ran as high as 4.3% just one month earlier.

The government is set to announce first-quarter gross domestic product -- the broadest measure of the nation's economic health -- on Thursday.

But the good news is that economists don't expect the sluggish quarter to drag down growth for the entire year. They're forecasting the economy to grow at a healthy 3.1% pace for all of 2011, just slightly below the 3.5% growth rate they were forecasting earlier in the year.

"We view the first quarter as being a pause in the pace of expansion," said David Berson, chief economist for the PMI Group. "That won't stand in the way of a modest expansion over the remainder of the year."

The cause of this sudden wave of pessimism? Rising oil and gas prices. High pump prices act like a tax on consumers, forcing them to cut back spending on other items. In addition, the large amount of oil the United States imports means that higher prices cause the trade gap to widen, which also cuts into GDP.

Other factors cited by some of the 22 economists who responded to the survey include businesses holding back on increasing their inventories and less construction activity than previously expected.

New home sales have also been near record lows for the last two months, even as prices for new homes have tumbled 11% since the end of last year. Existing home prices slid 5% in the same time period.

Surprisingly, jobs have been a bright spot in the economy in recent months. The unemployment rate fell a full percentage point from November to 8.8% last month.

While a weaker economy produces less demand for hiring, the slowdown does not necessarily mean that the labor market is in for another round of job cuts. In fact, some economists mentioned that jobs seem to be on pace for modest gains even in the face of the slowdown.

"Other data, such as business surveys, employment growth and industrial production, point to a firming economic recovery and we have not changed our view that 2011 will be a relatively solid -- but far from spectacular -- year for growth," said John Ryding, chief economist for RDQ Economics. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,042.87 11.73 0.07%
Nasdaq 4,515.16 -3.74 -0.08%
S&P 500 1,987.74 3.61 0.18%
Treasuries 2.58 -0.01 -0.35%
Data as of 11:27am ET
Company Price Change % Change
Apple Inc 99.50 -2.13 -2.10%
Yahoo! Inc 42.22 -0.33 -0.78%
Bank of America Corp... 16.74 0.01 0.03%
Facebook Inc 74.62 0.04 0.05%
Alcoa Inc 16.28 -0.11 -0.67%
Data as of 11:12am ET

Sections

Carrier offers voluntary buyout to senior staff, and plans to bring back some furloughed attendants. More

First official government report shows big decrease in uninsured after Obamacare kicks in and more Americans gain health insurance. More

AT&T has developed a software platform that can transcribe and offer near-real-time analysis on customer service calls. More

Atlanta has the country's highest level of income inequality, but civic entrepreneurs can close the gap. Here's how. More

What do all 401K millionaires have in common? Christine Romans explains what it takes to be a member of the club. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.