The economy grew 0.7 percent in the 4th quarter, bringing its rate for the full year (4th quarter to 4th quarter) to 1.8 percent. That is a substantial slowing from the 2.5 percent rates of the prior two years. By far the major component boosting growth was consumption, which grew at a 2.2 percent annual rate, driven largely by continued strong growth in durable goods consumption, which grew at a 4.3 percent annual rate. Housing was also a big contributor to growth, expanding at an 8.1 percent annual rate and adding 0.27 percentage points to growth.

Investment and trade were both big negatives in the quarter.  The real trade investment increased by $20.7 billion in the quarter subtracting 0.47 percentage points from growth. Spending on equipment and non-residential structures both fell in the quarter, subtracting 0.3 percentage points from growth. Equipment spending has been hard hit both due to the impact of the trade deficit on manufacturing and also due to the collapse of investment in energy related sectors.

Another factor depressing growth in the quarter was the slowing of inventory investment, which subtracted 0.45 percentage points from growth. The growth in final demand in the fourth quarter was 1.2 percent.

Inflation continues to be nowhere in sight. The core PCE grew at just a 1.2 percent annual rate in the quarter, bringing the increase for the year to 1.4 percent, well below the Fed's 2.0 percent target.