New Home Sales Sales of new single-family houses in January 2018 were at a seasonally adjusted annual rate of 593,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.8 percent (±19.0 percent)* below the revised December rate of 643,000 and is 1.0 percent (±16.4 percent)* below the January 2017 estimate of 599,000. Sales Price The median sales price of new houses sold in January 2018 was $323,000. The average sales price was $382,700. For Sale Inventory and Months’ Supply The seasonally-adjusted estimate of new houses for sale at the end of January was 301,000. This represents a supply of 6.1 months at the current sales rate. Read More Here. 

Gold and Silver - the ancient set of currency commodities -  metals which many considered a form of money, and are often talked about by both sides of the spectrum. Endless banter about these two, and if a move happens before the holidays - the news is set for the next few months. The point in this post is to show the daily settle price of Gold and Silver for reference, and to present the thought that Silver and Gold may both drop. 

Gold has been on a stride since before the (English speaking) new year. No doubt bolstered by fear from geopolitical risks to inflation. Since 2000 I have watched the price of Gold skyrocket without much remorse or any sprinkle of a reversion to the mean. This was caused by numerous events - financial and political - and over time we had a rise in Silver.  Silver peaked May 02, 2011 at $46.08 per troy ounce. I am bearish on Silver and a tad bearish on Gold, despite believing the prices will remain within 5-10% of current value for the next...the next while...

Gold Analysis From FocusEconomics:

Gold prices were volatile in recent weeks, weighed on by both upward and downward price pressures. On 9 February, gold closed the trading day at USD 1,313 per troy ounce, which was up 0.1% from the same day of January. The price was up 6.4% from the same day last year and was 0.8% higher on a year-to-date basis. Gold prices have risen in recent months, largely due to a weak U.S. dollar. Putting upward pressure on prices was a large sell-off in the U.S. stock market, which supported safe-haven demand for gold. On 5 February, U.S. stock markets recorded the worst trading day over six years. In addition, strong jewelry demand from India is adding upward pressure, along with a highly uncertain global backdrop. Moreover, recent data revealed that mine production fell in the fi rst nine months of 2017, in part due to output cuts in China amid environmental concerns. Meanwhile, an expected tightening in global interest rates is limiting gold’s gains. Bank of England Deputy Governor Ben Broadbent commented in February that interest rates could be raised sooner than previously expected and at a quicker pace. FocusEconomics analysts see gold prices receding slightly in the coming quarters but regaining ground in 2019. The global geopolitical climate should continue to support demand for gold; however, monetary policy tightening will weigh on the asset’s appeal. FocusEconomics analysts see the price of gold averaging USD 1,284 per troy ounce in the fourth quarter of 2018. In 2019, gold prices are projected to rise steadily throughout the year and average USD 1,334 per troy ounce in Q4. This month, most of our analysts left their projections unchanged. 14 forecasters made no changes to their projections for Q4 2018. However, 9 analysts raised their forecasts, while 2 analysts cut their forecasts. The bulk of our panel sees prices ending the year at a lower level. Some analysts, however, have a more bullish view, and the maximum forecast is for gold to average USD 1,460 per troy ounce in Q4 2018. At the opposite end of the spectrum, the minimum forecast is USD 1,100 per troy ounce.

Silver Analysis From FocusEconomics:

Silver prices lost ground at the beginning of February following a rise in January, as supply came in above demand. The recent price drop came despite higher investor demand for the precious metal amid a big sell-off in U.S. stock markets. On 9 February, silver closed the trading day at USD 16.3 per troy ounce, which was 4.2% lower than on the same day in January. The price was down 4.5% on a year-to-date basis and was 8.2% lower than on the same day in 2017. A growing supply of the precious metal ha s led to a supply surplus and downward price pressures. These have more than off set upward price pressures stemming from the recent plunge in the U.S. stock market, which recorded the worst trading day in over six years on 5 February, ramping up investor appetite to hold the safe-haven metal. Price gains have also been limited due to expectations of a hike in global interest rates. Leading the course on tightening monetary policy, the U.S. Federal Reserve is expected to raise rates two to three times this year, and the Bank of England also recently signaled sooner and more aggressive rate hikes to come. Prices are expected to gain ground as supply and demand dynamics become more favorable on recovering industrial and investor demand, and more limited supply. However, geopolitical tensions will continue to propel upside risks. FocusEconomics Consensus Forecast panelists expect prices to rise moderately this year, averaging USD 17.3 per troy ounce in Q4 2018. The panel sees silver prices rising further in 2019, to an average of USD 18.5 per troy ounce in Q4. The majority of our panelists held their forecasts for Q4 2018 steady from last month: 10 analysts made no changes to their projections. Meanwhile, 5 panelists raised their projections, and 4 revised down their forecasts. There was a divergence in panelists’ views: The maximum price forecast for Q4 2018 was USD 20.1 per troy ounce, while the minimum projected price was USD 15.3 per troy ounce.

Quits, layoffs and discharges, other separations, and total separations, January 2007–November 2017

From the BLS: The number of total separations, which is the sum of quits, layoffs and discharges, and other separations, was 5.2 million in November. The number of quits, which can serve as a measure of workers' willingness or ability to leave jobs, was little changed from the previous month for total private industry. Quits increased in November 2017 in transportation, warehousing, and utilities and state and local government, excluding education. Quits decreased in other services, real estate and rental and leasing, and mining and logging. The number layoffs and discharges was also little changed from October. The number of layoffs and discharges was little changed for total private, for government, and in all industries.

Here is a link to our Voluntary Quits 2016 post.

• One year into Donald Trump’s presidency, the economy has maintained solid growth momentum

in what has so far already been the country’s third-longest economic expansion on record. In

a bid to better assess what 2018 holds for the U.S. economy, we polled our global network of

analysts. Of the sample of economists from international and local economic institutions we

contacted, 95 answered the survey. This special report includes the highlights from our poll.

• The analysts surveyed are broadly in agreement regarding the robustness of the economy’s

fundamentals, and they largely see 2018 growth either accelerating or remaining steady at last

year’s rate of expansion. They expect the recently approved tax rewrite and a weaker dollar to

shore up business investment, but many are skeptical on the long-term benefits of the tax cuts.

• The majority of the economists surveyed expect stronger inflation and a tight labor market to

warrant three interest rate hikes this year. On trade, analysts believe NAFTA will be preserved

with only minor changes, while most respondents see no meaningful trade dispute taking

place with China. Finally, analysts are split on Democrats’ chances at taking back the House of

Representatives in this year’s November midterm elections.

Healthy GDP data for the fourth quarter rounded off a strong year of growth in the U.S. economy. Household spending rose in Q4 at a solid rate on continued job growth, increased wages and high stock prices, while fixed investment benefitted from sky-high business sentiment and reconstruction efforts following weather-related disruptions in Q3. The GDP report came on top of a string of upbeat data releases suggesting momentum likely carried over into 2018. Survey-based manufacturing data for December and January showed soaring order books, while initial jobless claims continued to decline up to the week ending on 20 January, an early indication that employment growth remained resilient at the start of the year. Despite the rosy economic picture, political wrangling dominated headlines in recent weeks. Following a brief shutdown, Congress struck a deal on 22 January to reopen the federal government through 8 February but failed to resolve the underlying issues that caused the shutdown, including an agreement on DACA. An accommodative fiscal stance should lift consumer spending and nonresidential investment this year, while an exceedingly tight labor market, strong momentum in the housing sector and upbeat stock prices will continue to buttress economic activity. FocusEconomics panelists see growth of 2.6% in 2018, which is up 0.1 percentage points from last month’s estimate. In 2019, growth is seen moderating to 2.1%.

Inflation eased to 2.1% in December from 2.2% in November. That said, core inflation inched up to 1.8%, reinforcing market expectations of an interest rate hike at the Fed’s March monetary policy meeting. Members of the FOMC project three interest rate increases in 2018 as employment continues to rise and inflationary pressures mount. FocusEconomics panelists see inflation averaging 2.2% in both 2018 and 2019.

Retail sales finished the year on a strong note, growing 0.4% from the previous month in December and falling just short of market expectations of a 0.5% month-on-month increase. December’s print came in below the upwardly revised 0.9% expansion recorded in the previous month. Although December’s figure marked the lowest rate since August, it suggests sustained robustness in private consumption growth in the fourth quarter and showcases the overall health of the U.S. economy. Strong December sales were led by a very sturdy performance in non-store retailers, a component dominated by e-commerce, which saw sales jump 1.2% month-on-month in December. Furniture stores and building materials retailers also performed above average, with monthly sales growing 0.6% and 1.2%, respectively. Vehicle sales increased modestly by 0.2% in December, whereas gasoline sales remained steady from the previous month. Meanwhile, miscellaneous store retailers logged a notable 2.9% mom dip in sales, while clothing stores and electronics and appliances stores recorded smaller sales contractions in December. In annual terms, growth in retail sales moderated to 5.4% in December from an upwardly revised multi-year high of 6.0% recorded in the previous month. Annual average retail sales growth ticked up to 4.6% in December from 4.5% in October, marking the highest print in nearly five years. 

Whereas strong sales numbers point to a marked contribution from consumers to GDP in the last quarter of the year, it also points toward potential overheating and pro-inflationary risks in the U.S. economy, which could lead to rate hikes by the Federal Reserve as early as the first quarter of 2018. FocusEconomics Consensus Forecast panelists expect private consumption to grow 2.6% in 2018, which is up 0.2 percentage points from last month’s forecast. For 2019, the panel sees private consumption increasing 2.2%.

Monetary Analysis
Core consumer prices, which exclude volatile items including food and energy prices, rose 0.3% from the previous month in December. This came above market expectations of a 0.2% increase and followed the timid 0.1% month-on- month rise recorded in November. The print was largely driven by strong price increases for used cars and trucks, housing costs and medical care. These dynamics led core inflation to inch up to 1.8% in December from 1.7% in November. The lack of meaningful inflationary pressures, despite robust economic growth and an exceedingly tight labor market, has been at the forefront of the debate among Federal Reserve officials. In this sense, December’s stronger-than expected core inflation results are likely to reinforce market expectations of an interest rate hike at the Fed’s March monetary policy meeting. However, any additional hikes this year—the Fed’s “dot plot” currently shows three interest rate increases in 2018—will remain largely dependent on the evolution of core prices. FocusEconomics Consensus Forecast participants expect inflation to average 2.2% in 2018, which is up 0.1 percentage points from last month’s forecast. For 2019, the panel also expects inflation to average 2.2%.

Domestic economic activity appears to have lost some steam in the fourth quarter from the previous one, but remained buoyant nonetheless. Industrial production in November expanded at the slowest pace in yearon-year terms since August 2016, and retail sales contracted in the same month owing in part to higher inflationary pressures. Retail sales were lower despite declining unemployment, which dropped in November to the lowest rate since June 2008. Contrasting slower growth in the domestic economy, growth in the external sector picked up. Exports expanded at a solid rate in both October and November thanks to improved demand from Estonia’s main trading partners. The expansions observed in the first two months of Q4 were spearheaded by robust sales of mineral products as the shale oil industry recovers on the back of higher prices for energy products. Economic growth is set to decelerate in 2018 and 2019 from 2017’s multi-year high but is expected to remain buoyant. Inflows of EU funds will boost growth investment, and changes to the income tax system will boost growth in private consumption. FocusEconomics panelists project that GDP will expand 3.1% in 2018, which is up 0.1 percentage points from last month’s forecast. For 2019, the panel expects GDP growth of 2.9%. HICP inflation moderated from November’s multi-year high of 4.5% to 3.8% in December. HICP inflation is expected to decline as the base effect from higher taxes and the rise in commodiup 0.2 percentage points from last month’s forecast. 

According to Statistics Estonia, growth in industrial production moderated from a revised working-day adjusted 6.0% year-on-year increase in October (previously reported: +6.2% year-on-year) to a 2.7% increase in November. The result marks the seventeenth consecutive monthly expansion and came on the back of an expansion in mining, which more than offset a contraction in energy production. A seasonally-adjusted month-on-month assessment shows that growth in industrial production swung from a 1.6% increase in October to a 1.4% contraction in November. Finally, the annual average variation in industrial production dropped from 8.6% in October to 8.0% in November. FocusEconomics Consensus Forecast panelists expect industrial production to grow 3.9% in 2018, which is up 0.3 percentage points from last month’s forecast. The panel foresees industrial production increasing 2.5% in 2019.

The Central Bank expects GDP to grow 4.2% in 2018 and 3.1% in 2019. FocusEconomics Consensus Forecast participants see the economy growing 3.1% in 2018, which is up 0.1 percentage points from last month’s estimate. In 2019, economic growth is expected to grow 2.9%. MONETARY SECTOR | Inflation moderates in December Consumer prices dropped 0.3% in December compared to the previous month, contrasting the 0.5% month-on-month increase observed in November. According to Statistics Estonia, the monthly reading was driven by a price drop in 7 of the 12 components of the index. A steep decline in the prices of alcoholic beverages and tobacco was largely behind December’s month-onmonth drop. Inflation moderated from 4.2% in November to 3.4% in December. Annual average inflation increased from 3.3% in November to 3.4% in December. HICP inflation moderated from November’s over five and a half years high of 4.5% to 3.8% in December. Lastly, average HICP inched up from 3.5% in November to 3.6% in December. FocusEconomics Consensus Forecast panelists forecast harmonized inflation to average 3.1% in 2018, which is up 0.2 percentage points from last month’s forecast. In 2019, the panel expects harmonized inflation to average 2.8%.

This chart says it all.

"Like all fiat currencies, cryptocurrencies really don’t have intrinsic value. But that doesn’t mean that people won’t treat them as if they do, and sometimes for sustained periods of time. In fact, people have throughout history accepted things that have no value in exchange for things that do. Examples of non-government-issued currencies being used for periods of time include playing cards in the French colonies in the 18th century and limestone discs on the island of Yap centuries ago. What this means in practice is that even if a currency doesn’t have intrinsic value, it could still be used for some period of time." - Steve Strongin, Goldman Sachs Global Investment Research.

The economy continues to gather strength heading into the new calendar year, although it remains fragile, as evidenced by December’s PMI which sank back into pessimistic territory. Other indicators are more positive: In the July–September period growth strengthened, and the unemployment rate declined to a multi-year low. In addition, international reserves were significantly bolstered in 2017 thanks to renewed investor confidence, while the trade deficit narrowed sharply. On 20 December, the IMF’s Executive Board completed the second review under the Extended Fund Facility, unlocking USD 2 billion of additional funding. This will be complemented by USD 1.2 billion recently committed by the World Bank to help support the economy and boost job creation. While praising reform progress, the IMF urged authorities to continue paring back energy subsidies and take steps to increase tax revenues. The fiscal and external positions should be strengthened by the giant Zohr gas field that came onstream in December, moving Egypt closer to energy self-sufficiency. Growth should remain solid going forward. New investment and industrial licensing laws are likely to boost investment, while the external sector will benefit from the weaker pound. However, the elevated debt burden could become a pressing concern if reform momentum slows, and security worries continue to cloud the outlook. FocusEconomics analysts expect GDP to expand 4.4% in FY 2018, up 0.1 percentage points from last month’s forecast, and 4.8% in FY 2019. Headline inflation dropped from 30.8% in October to 26.0% in November, on the back of a favorable base effect. At its 28 December meeting, the Central Bank kept the Overnight Deposit Rate unchanged at 18.75%. Our panelists expect inflation to decline going forward, averaging 16.2% in calendar year 2018 and 12.2% in calendar year 2019.

The Emirates NBD Egypt Purchasing Managers’ Index (PMI) fell from 50.7 in November to 48.3 in December, signaling a worsening in operating conditions after briefly moving into positive territory for the first time in over two years in the prior month. December’s decrease was driven by contractions in output and new orders both at home and abroad. On the positive side, despite subdued activity, the rate of job shedding reached a 28-month low, likely thanks to strong business confidence regarding future growth prospects. Firms’ sentiment was underpinned by increased capital expenditure and expected future economic stability. On the price side, input price inflation eased to a near two-year low, while the rate of output price inflation also dipped.