The U.S. economy was a bit stronger in the fourth quarter than earlier projected as businesses boosted spending and inventories. Exports saw their largest increase since late 1996.

Gross domestic product increased at a 4.1% annual rate, the Commerce Department reported Friday. That was half the 8.2% pace of the third quarter, but a still a solid performance. In its original estimate a month ago, the government said GDP grew 4% during the fourth quarter.

Economists had expected the revision to show 3.7% growth.

Business spending shot up 9.6%, a sharp increase from the previous estimate of 6.9%.

Another indication of optimism in the board room: companies enlarged their inventories byUS $14.9 billion, more than double the original estimate of a US$6.1 billion increase.

Exports jumped 21%, which was the largest increase since the fourth quarter of 1996. Imports advanced by 16.4%. The government originally reported those figures as increases of 19.1% and 11.3%, respectively.

Consumer spending rose at a 2.7% annual rate, slightly higher than the first estimate of 2.6%.

Consumers’ spending on durable goods slipped 0.1%, revised down from a previously reported 0.9% rise.

In all of 2003, the U.S. economy grew 3.1%, its best rate since 2000’s 3.7%.

A separate report showed consumer sentiment fell sharply in February. The University of Michigan reported Friday its gauge of consumer sentiment dropped to 94.4 from 103.8 at the end of January. The drop in the final reading for February was presaged by the unexpectedly weak 93.1 recorded mid-month.

Measures of both current conditions and expectations for the future both declined, with the latter tumbling nearly 12 points to 88.5.

A third report, on manufacturing in the Chicago region, showed that overall activity declined in February. The Chicago branch of the National Association of Purchasing Managers reported its business barometer slipped to 63.6 from 65.9 in January. Readings above 50 indicate expansion, while those below that mark point to contraction.