New home construction sank to a more than two year low in December at a seasonally adjusted annual rate of 1.078 million homes, down -11.2% from the previous month, and down -10.9% from December 2017. The unadjusted annual rate of construction for 2018 was up +2% to 1.247 million, with single family construction up +1.0% to 872.8 thousand, and multifamily units up +5.5% to 373.7 thousand units. The rate for issuing new building permits edged up +0.3%, with a +5.7% increase for 5 or more unit construction offset by -5.1% drops for 2 to 4 unit construction and -2.2% drops in single family construction.

GDP rose +2.6% in 2018 Q4, down from +3.4% in Q3, and bringing 2018’s yearly GDP growth to +2.9%. The drop in the Q4 GDP rate was due to declines in private inventory investment, consumer spending, and government spending, which were partially offset by increases in exports and nonresidential fixed investment. Inflation slowed, with overall prices increasing at a +1.6% rate compared to +1.8% in Q3, and consumer prices increasing +1.5% vs +1.6% in Q3. After tax disposable personal income was up +5.7%, vs +4.2% in Q3, and inflation adjusted after tax income increased by +4.2% vs +2.6% in Q3. Q4’s drop in consumer spending and income increase helped boost the personal savings rate to +6.7% in Q4, up from +6.4% in the previous quarter.

Personal income dropped -0.1% in January after December’s +1.0% increase, with after tax income dropping -0.2% compared to increasing +1.1% in December. December’s income increase was largely due to a $83.4 billion one-time dividend payment from VMware Incorporated, and a $29.2 billion increase in farm payments which included subsidy payments from the Agriculture Department’s Market Facilitation Program. Yearly inflation dropped -0.1% in December to +1.7%, and core inflation ,which excludes food and energy, remained steady at +1.9%, below the Federal Reserve’s +2.0% target rate.