We had a very similar experience with our son in first grade. He was kept at the same reading level all year. (4th grade) Meanwhile, at home it was obvious he was reading faster, with better comprehension, and picking harder and harder books that he enjoyed and could discuss. My particular giftie is not known for a shining work ethic and pushing himself. The end of our first grade experience actually led to homeschooling.
I think teachers say these things because they're at a complete loss and don't really understand gifted children. See if you can get the teacher to let you supply reading material for him maybe?
Books my son enjoyed in first grade were Roald Dahl books, Spiderwick Chronicles, Kate DiCamillo, Goosebumps, Warriors. Between 1st and 2nd he started the Harry Potter series (He was very intimated by the size of the books!). He also loved (and still loves as a 3rd grader) more complex comics and graphic novels.
Good luck!
