The US economy's recovery from the COVID-19 pandemic disruptions accelerated in the first quarter of the year, posting annualized growth of 6.4%, the government reported Thursday.
But business reopenings and increased spending also pushed prices higher, with a key inflation measure jumping 3.5% in the January-March period, compared to a rise of just 1.5% in the prior quarter, the Commerce Department reported.
Even excluding more volatile food and energy prices, the price index for personal consumption expenditures (PCE) rose 2.3%-- surpassing the Federal Reserve's 2% target.
Fed chief Jerome Powell on Wednesday again tried to stomp out increasing concerns about inflation, saying the price spikes in coming months is largely due to the bounceback from the sharp declines seen in the early months of the pandemic.
Supply chain bottlenecks created by the restart from last year's shutdowns also are playing a role, but Powell insists that both factors are only transitory.
The Fed has pledged to keep its stimulative policies in place, including interest rates near zero, until employment has recovered and inflation exceeds the target for some time.
Consumers began to spend more freely in the first quarter, led by purchases of autos, homes and big-ticket consumer goods, as well as on services like hotels and restaurants, the report said.
Federal government spending jumped nearly 14% in the quarter.
Excluding the growth surge in the third quarter of 2020, the gain is the biggest since third quarter 2003.
The measure shows how fast the economy would expand if the growth rate continued for a full year. Compared to the fourth quarter, GDP rose 1.6% after a 1.6% rate in the prior three months, the report said.