WASHINGTON -- The economy snapped out of a sluggish spell and grew at a faster-than-expected 3.5 percent pace in the final quarter of last year as consumers ratcheted up spending despite a painful housing slump.
The fresh snapshot of business activity, released by the Commerce Department yesterday, underscored the resilience of the economy; it has managed to keep on moving despite the ill effects of the residential real-estate bust and an ailing automotive sector.
The economy's performance in the October-to-December quarter, which followed two quarters of rather listless activity, exceeded analysts' forecasts for a 3 percent growth rate.
The economy opened 2006 on a strong note, growing at a 5.6 percent pace, the fastest spurt in 2 1/2 years. But it lost steam during the spring and late summer. It grew at a 2.6 percent pace in the second quarter and then a weaker 2 percent pace in the third quarter. The fourth-quarter's rebound ended the year on a positive note.
For all of 2006, the gross domestic product increased by 3.4 percent. That was an improvement from a 3.2 percent showing in 2005 .
That's even more impressive considering the economy was hit by the housing slump. Investment in home building for all of last year was slashed by 4.2 percent, the most in 15 years.
Gross domestic product measures the value of all goods and services produced within the United States and is the best barometer of the country's economic standing.
"Housing and autos hit the economy with their best punch, and the economy is still standing. It is dancing," said Stuart Hoffman, chief economist at PNC Financial Services Group.