U.S. GDP growth fell to 1.8 percent annual rate in the first quarter of 2011 after a 3.1 percent fourth quarter rise, the Commerce Department said on Thursday. Economists had expected a 2 percent growth pace.

The personal consumption expenditures price index rose at a 3.8 percent rate, its fastest pace since the third quarter of 2008, after increasing 1.7 percent in the fourth quarter.

The core index, which excludes food and energy costs, accelerated to a 1.5 percent rate, the fastest since the fourth quarter of 2009, from 0.4 percent in the fourth quarter.

In another report, new weekly claims for U.S. jobless benefits jumped to 429,000 in the April 23 week, from 404,000 the prior week.

ANALYSTS COMMENTS:

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA:

GDP: It came in pretty within expectations. They were a few surprises with consumption and business investments which came in a bit stronger than expected. You are seeing a largely weather story in January and February and a rebound in March.

There are some concerns going forward. We think gasoline prices will continue to dampen the recovery. We are looking at a moderate recovery here. It will still some time before we see the economy fully recover.

With the rise in the deflator and PCE, I don't think it's a start of a trend. Given the general outlook we are still the economy restrained by energy, tight credit and weak housing. There is not a lot of underlying inflationary pressure.

JOBLESS CLAIMS: There is a lack of job creation. If the job creation machine is weak, this could be a signal that smaller firms are curtailing their hirings just as it seemed they were hiring again.

As for the March payroll report, we'll probably see it well under 200,000, maybe 150,000 or less. We still have a lot of ground to make up.

STEPHEN STANLEY, CHIEF ECONOMIST, PIERPONT SECURITIES, STAMFORD, CONNNECTICUT:

GDP : It's very much in line with consensus. The underlying components were a little better than what I had expected. The biggest factor was weather. It hurt consumption and construction. Energy also hurt consumption as well. Higher gasoline prices took a bigger bite out of people's budget.

JOBLESS: It's certainly disappointing. The number has risen three weeks in a row and that's a bit worrisome. The Labor Department is attributing it to the Easter holiday, but we'll see. I think there is upward pressure from these auto plants having rolling shutdowns. It might be worth 15,000 to 30,000 a week in claims. If this were to stay significantly above 400,000, i would be worried.

BOB ANDRES, CHIEF INVESTMENT STRATEGIST & ECONOMIST OF MERION WEALTH PARTNERS IN BERWYN, PENNSYLVANIA:

I'm surprised (GDP) wasn't lower. You had a number of different things -- Bernanke mentioned the harsh winter weather, it's a little bit of a cop out but it certainly played a part. The trade gap widened and ... capital goods orders were down in the first quarter. On top of that you had higher commodity prices.

Coming in at 1.8, to get to where Fed's forecast is, you're going to need some robust growth in (quarters) 2, 3 and 4.

In my mind, the Fed's forecast and the Street's forecast are more than likely a little too optimistic going forward.

WILLIAM LARKIN, PORTFOLIO MANAGER WITH CABOT MONEY MANAGEMENT IN SALEM, MASSACHUSETTS:

Jobless claims popped back above 400,000 again, and that's been a psychological barrier. We had been on a nice trend with claims, but now we're finding resistance, which calls into questions the jobs recovery.

GDP was a little on the light side, though there were positives and negatives in the report. But with the amount of injection of capital into the economy, you'd hope that we would be able to get above 2.0 percent growth. In the short-term this is bad for stocks and good for bonds.

RICHARD BRYANT, HEAD OF TREASURY TRADING, MF GLOBAL SECURITIES, NEW YORK:

The big surprise was that jobless claims were a little bit higher than people were looking for, a little bit higher than expectations, so the Treasury market is retaining the bid that it has demonstrated since yesterday afternoon. This data certainly supports the bid. GDP had no major surprises, the headline was a little but weaker than expectations.

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, UNIT OF THOMSON REUTERS:

This is a significant slowing from a Q4 pace of 3.1 percent though inflationary pressures look firmer, with core PCE prices marginally ahead of consensus at 1.5 percent and up from a record low of 0.4 percent in Q4. The core PCE data is not high enough to cause inflationary alarm but the overall PCE price index at 3.8 percent, lifted by food and energy, was considerably stronger, the highest since Q3 2008.

Inflation