The Commerce Department reported that economic growth in the U.S. rose from an annual rate of 2.6 percent in Q3 to 3.2 percent in Q4, the improvement coming from increased consumer spending and higher net exports of goods and services.

For all of 2010, the economy expanded 2.9 percent, up from a 2.6 percent contraction in 2009, and the best performance since 2005 when growth registered 3.2 percent.

As shown below, consumer spending saw its biggest quarterly gain since early-2006, up at an annualized rate of 4.4 percent during the October to December period last year.

The large contribution by net exports was due primarily to shrinking imports, down 13.6 percent in Q4 versus a 5.6 percent gain for exports and a dramatic reduction in inventories drove domestic investment sharply lower, offsetting solid gains in both residential and nonresidential fixed investment.