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Inflation fears could put brakes on the Massachusetts economy

BOSTON—The Massachusetts economy has enjoyed above-average growth in 2006, led by a pickup in hiring in the information-technology industry. But consumer confidence has plummeted recently because of inflation fears and a weakening housing market, and that is expected to put the brakes on the state’s economy for at least the next few months, according to an economic report.

“The state’s economy expanded solidly in the first quarter of this year at an annual rate of 3.5% and growth in April and May was on track to repeat this performance for the second quarter,” according to a report from the University of Massachusetts’s Donahue Institute, which tracks the state’s economy.

The state’s job growth, which has been at an annualized rate of 1.1%, is being offset by the impact of a weak stock market on household wealth, the report said. Higher energy costs and interest rates, the report noted, are causing consumers to cut back on spending, which is in turn expected to hurt the state’s economy and job growth.

“At present, these forces seem to be about equally balanced, enabling the state economy to continue to grow at a moderate pace, although somewhat slower than the last six months ending in May,” according to the report.

Data trends indicate that the economy should grow at an annualized rate of 2.2% over the six months through November.

The state’s annualized economic growth rate—at 3.5% in the first quarter—is about on par with that of the past 30 years, but it is well below the national rate of 5.3% for the period, the Donahue Institute said.

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