Washington ? Buffeted by rising energy prices and weakened consumer and business spending, the economy grew at an annual rate of just 3.1 percent in the first quarter. The slowest pace of expansion in two years was evidence of a new “soft patch.”

The latest reading on gross domestic product, released by the Commerce Department on Thursday, showed that consumers and businesses turned cautious in their spending in the January-to-March quarter, a key factor in the slower economic growth. High energy prices and rising borrowing costs are causing Americans to tighten their belts a bit.

The first-quarter’s GDP figure, down from a 3.8 percent pace logged in the final quarter of 2004, represents the economy’s most sluggish showing since the first quarter of 2003, when economic activity expanded at an even more mediocre 1.9 percent rate.

GDP, the broadest barometer of the economy’s health, measures the value of all goods and services produced within the United States.

On Wall Street, the latest GDP report rattled investors. The Dow Jones industrials tumbled 128.43 points to close at 10,070.37.

In a second report Thursday, the number of new people signing up for unemployment benefits rose last week as businesses coped with rising costs. New claims rose by 21,000 to 320,000, the Labor Department said.

The newest snapshot of the economy disappointed economists. Before the report’s release, they were forecasting a 3.5 percent growth rate for the first quarter.

That estimate marked a downgrade from just a few weeks ago when economists were predicting that business growth would clock in at a pace of 4 percent or better in the first quarter. But they scrambled to lower those forecasts in the wake of a spate of disappointing economic reports in recent weeks.