The Department of Commerce announced today that in the fourth quarter of 2006, Gross Domestic Product, the broadest gauge of economic activity, grew at a remarkable 3.5%.

The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, state and local government spending, and federal government spending that were partly offset by negative contributions from residential fixed investment  �
and private inventory investment.  Imports, which are a subtraction in the calculation of GDP, decreased.

Residential construction declined 19% while consumer spending (by far the largest component of the economy) increased 4%.

This report means that any cut in interest rates from the Federal Reserve just became very unlikely and that those predicting a recession in 2007 have just been given a sharp kick.

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