The U.S. economy expanded at modest pace in the first three months of 2013, an improvement from the anemic growth seen at the end of the last year.

Gross domestic product expanded at a 2.5 percent annual rate in the first quarter, up from 0.4 percent in the fourth quarter of 2012, the government said Friday. However, the first quarter rebound was not as robust as markets were expecting. Analysts were calling for GDP to grow 3.1 percent.

Consumer spending accelerated and companies boosted inventories after a shutdown of government services was averted on January 1.

Consumer purchases rose 3.2 percent from 1.8 percent in the fourth quarter, but a sharp rise in gas prices contributed to the increase.

The housing sector continued to show signs of significant improvement, as spending on home construction surged 12.6 percent, following strong gains in the previous two quarter.

Except for higher prices at the pump, which have since turned lower, inflationary pressures were subdued. The price index of personal consumption expenditures rose at a 0.9 percent annual rate, down from 1.6 percent in the prior two quarters.

With the economy expected to muddle through the rest of 2013 and inflation held in check, the Federal Reserve will likely keep its aggressive bond buying program in place for the foreseeable future.

RTTNews