The books are being closed on another amazing year for the nation's economy, led by the seemingly invincible consumer.

The national economy grew at a crackling 5.6% annual clip in the fourth quarter and an impressive 4.1% for the year, the Commerce Department estimated Friday.

The chief power source was consumer spending, which barreled ahead by 4.4% in the last quarter and by 5.2% for the year.

"Auto sales will probably be down in the first quarter, but other types of spending show no sign of slowing, and we assume that first-quarter spending will be up at a 4% rate," said Bruce Steinberg, chief economist at Merrill Lynch & Co.

"Some moderation is likely later in the year but has yet to be seen," Mr. Steinberg said.

Other figures paint a darker picture of consumer spending.

Last year, total personal consumption expenditures rose 6% while after- tax income was up 4% - meaning that expenses grew 50% faster than income.

"This was the sixth consecutive year that the rise in expenditures far exceeded that for income," according to Lacy H. Hunt, economist and partner at Hoisington Investment Management Co. in Austin, Tex.

The upshot is that a sizable portion of consumer activity continues to be debt-financed amid an environment of record confidence, driven by the belief that stock prices will keep rising.

"Consumers were willing to go deeper in debt because of their stock market gains but pushed their total debt to a record 97% of disposable personal income," Mr. Hunt said.

"The record household leverage is an indication that robust housing and vehicle sales were purchased from expected, not realized, income."

Federal Reserve Chairman Alan Greenspan referred to the phenomenon in recent congressional testimony:

"While discussions of consumer spending often continue to emphasize current income from labor and capital as prime sources of funds, during the 1990s capital gains-which reflect the evaluation of expected future incomes-have taken on a more prominent role in driving our economy."

The trend worries many Wall Street economists, including some of the most bullish observers.

Ian Shepherdson, chief U.S. economist for High Frequency Economics, Valhalla, N.Y., said he thinks this year's first half will be stronger than expected but the outlook for the second half is "much less clear" because of weaker prospects for stocks amid slower corporate earnings.

The "wealth effect"-the boost to spending from rising asset prices-is bigger than believed, he contends. Consequently, "there can be few doubts now that consumer confidence, spending and saving behavior is more closely tied to the stock market than ever before."

And stocks may not even need to fall sharply to alarm consumers-only fail to match the huge gains of the last few years.

"The closest relationship we have found between the stock market and consumer behavior links the rate of increase of stock prices, rather than the level, to consumer confidence - and hence, to saving and spending," Mr. Shepherdson said.

Thus, "people who have grown used to big gains in stock prices need to see those gains continue in order to remain confident. Addicts always need a bigger fix."

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