The U.S. economy registered stronger than expected growth in the final three months of the year, taking the 2004 growth rate to 4.4 percent, the best showing in five years.

The data show that while Japan, Germany, Italy and the Netherlands were slowing down and even declining in the last three months of 2004, the U.S. economy was expanding at a 3.8 percent annual rate. This was a revision of the Commerce Department's initial report of a 3.1percent growth rate for the fourth quarter. The improvement reflects higher spending on capital investment and a build-up of inventories.

Economists were pleasantly surprised with the report, citing it as further evidence that the U.S. economy has not been severely impacted by the sharp increase in oil prices that occurred earlier in 2004. There had been predictions that oil priced in the $50 per barrel range would trigger a recession.

Jim Smith, a professor of economics at the graduate school of business at the University of North Carolina, says the report suggests that the economy will continue to grow rapidly during the course of 2005.

"It certainly looks like, finally, we've got the economy running in great shape. Finally, we've made up in October and November, all of the sub-par industrial output numbers that, as you know, had peaked in June of 2000. And so, looking ahead, every month this year should be a record on industrial production," he said.

Mr. Smith predicts U.S. economic growth of 4.2-percent this year. The International Monetary Fund is projecting a modest retreat from the five-percent global growth of 2004. The IMF expects the U.S. economy will register 3.5 percent growth this year while Europe is projected to expand by only two percent. China's stunning nine percent growth is expected to slow modestly to 7.5 percent.