Pertinent to cover Russia since Putin has recently won. I noticed a credible source recently guesstimated Putin would be in power until 2030. 

I have included Russia’s ”official” Use of GDP report and stats. Details below are from FSSS (Russia), LTCI and from a March 2018 report from our content partner FocusEconomics. 

Use of GDP

	2016							2017
	I quarter	II quarter	I half	III quarter	9 months	IV quarter	Year	I quarter
	at current prices; billion roubles
Gross Domestic Product at market prices	18815.9	20429.6	39245.5	22721.2	61966.8	24076.9	86043.6	20090.9
of which:
final consumption expenditures	14245.2	14497.0	28742.2	15203.7	43945.9	15876.8	59822.7	15064.1
households	10357.8	10553.8	20911.6	11218.7	32130.3	11811.1	43941.4	10976.7
public administration	3806.0	3860.7	7666.7	3901.6	11568.3	3981.1	15549.4	3995.6
non-profit institutions serving households	81.4	82.5	163.9	83.4	247.3	84.6	331.9	91.8
gross capital formation	2981.8	4422.6	7404.4	6440.8	13845.2	6286.9	20132.1	3033.5
gross fixed capital formation *	2907.9	3912.4	6820.3	4392.7	11213.0	6899.4	18112.4	3022.1
changes in inventories	73.9	510.2	584.1	2048.1	2632.2	-612.5	2019.7	11.4
net exports of goods and services	1326.3	1064.1	2390.4	712.4	3102.8	1335.7	4438.5	1720.0
statistical descrepancy	262.6	445.9	708.5	364.3	1072.9	577.5	1650.3	273.3
	volume indices; at constant prices, percent of corresponding period of previous year
Gross Domestic Product	99.6	99.5	99.5	99.6	99.6	100.3	99.8	100.5
final consumption expenditures	96.7	95.5	96.1	96.3	96.2	97.5	96.5	102.1
households	95.7	94.1	94.9	95.2	95.0	96.8	95.5	102.7
public administration	99.6	99.5	99.5	99.5	99.5	99.5	99.5	100.4
non-profit institutions serving households	100.8	100.7	100.8	100.7	100.7	100.8	100.7	100.0
gross capital formation *	102.5	101.6	102.0	99.9	101.0	102.7	101.5	100.1
exports	99.7	104.9	102.3	104.2	102.9	103.7	103.1	107.1
imports	92.2	95.4	93.8	96.3	94.8	100.4	96.2	116.5

*    Including aquisition less disposals valuables.

OVERVIEW | Incoming data suggests that Russia’s economic recovery was broadly steady in recent months, although growth likely remained lackluster. The manufacturing PMI fell to the lowest level since July 2017 in February, and the Ural oil price also lost some recent gains. However, industrial production expanded notably in January, after two months of contraction, while exports grew at a double-digit pace in December, the latest month for which data is available. Overall, the economy has come a long way since the 2015–2016 recession, and on 23 February, S&P Global Ratings upgraded Russia to investment grade status after three years at junk— raising the rating from BBB- to BB+ with a stable outlook. The move sparked a rally in Russian assets. President Vladimir Putin's win is a continuation of current economic policy.

In his annual state of the nation address on 1 March, which was postponed to coincide with the election, Putin outlined his key priorities for a fourth presidential term. The speech centered on boosting state spending on infrastructure and social measures, and the president made pledges to raise life expectancy, increase GDP and lower the poverty rate. Concrete details on how these measures would be funded are not yet known, although Putin stated that improving the efficiency of government spending could generate funds. Overall, Russia’s fiscal picture has become brighter thanks to higher oil prices, strong demand for the country’s bonds and a change in fiscal rules, which should give the government room to adjust the budget. Putin also unveiled a wide array of new weapons and struck a bellicose tone in the speech, suggesting that the relationship between Russia and the west will remain tense. Looking ahead, the economy’s moderate recovery should continue this year, benefiting from monetary policy easing, higher oil prices and healthy household consumption. The production cut deal with OPEC will, however, keep oil output limited, capping the country’s export performance. Moreover, the recovery has been lackluster, as the economy is burdened with structural issues and is still to a large extent dependent on the energy sector. FocusEconomics Consensus Forecast panelists see GDP expanding at 1.8% in 2018, which is down 0.1 percentage points from last month’s forecast. Panelists expect the economy to expand 1.8% in 2019.

CENBANK - MONETARY SECTOR | Inflation edge down in January
In January, consumer prices rose 0.3% from the previous month, a notch below the 0.4% month-on-month rise observed in December. According to the Federal State Statistics Service (Rosstat), the result largely reflected a smaller rise in prices for foodstuffs. Inflation remained edged down to a new historic low of 2.2% in January, below December’s 2.5%. Price pressures have fallen notably in 2017, in part due to a solid performance by the ruble. Inflation lies far below the Central Bank’s target of 4.0%. Annual average inflation also declined from 3.7% in December to 3.5% in January, another historical low. Panelists see inflation ending 2018 at 4.0%, which is unchanged from last month’s forecast. For 2019, participants expect inflation to end the year at also 4.0%.

Central Bank cuts key interest rate to 7.50% in February At its 9 February meeting, the Board of Directors of the Central Bank of the Russian Federation (CBR) decided to cut the key interest rate by 25 basis points to 7.50%, a move widely expected by market analysts. The decision followed a larger-than-expected 50 basis-points reduction in December and marks the lowest policy rate since June 2014, continuing the CBR’s monetary easing cycle. The Bank’s decision came after inflationary pressures moderated in recent months, with inflation easing to a record-low 2.2% in January, significantly below the official 4% target. Adjusting its assessment of inflation, the CBR noted that permanent factors may be exerting a stronger effect on inflation dynamics than temporary ones, as previously thought. According to the communiqué, effects from a strong rubble and downward pressures from food prices are expected to subside by the end of the first half of 2018. Weak economic activity in the final quarter of 2017 also contributed to the Bank’s decision to cut its policy rate, even as it acknowledged the reasons behind the slowdown remain somewhat uncertain. Against this backdrop, the Bank decided that the buildup of risks has slightly shifted towards the economic growth front. It did not see significant upward risks to inflation in 2018 and saw inflation likely falling short of its target this year. As a result, the CBR highlighted its commitment to continue cutting the policy rate and “complete the transition from a moderately tight to neutral monetary policy in 2018.” The sustained easing of policy should help generate the conditions for inflation to pick up and approach the Bank’s target by the end of 2019 rather than the end of 2018, departing from the assessment at its December meeting. Meanwhile, the Bank maintained its medium-term outlook (2019–2020) from its previous meeting, noting that upside risks to inflation continue to prevail over the risk that inflation will significantly deviate downwards from its target. These upside risks include elevated inflation expectations, lower propensity to save among households and wage growth outpacing productivity growth due to labor shortages.

EXTERNAL SECTOR | Export growth wanes moderately in December Merchandise exports totaled USD 37.9 billion in December, which represents a robust 21.1% increase compared with the USD 31.3 billion observed in the same month of 2016. The expansion was below November’s 25.2% increase. Supportive global conditions and higher commodity prices have led to Russian exports surging in recent months. Imports increased 23.9% annually in December, slightly above November’s 23.5% increase and came in at USD 24.2 billion. The trade surplus came in at USD 13.7 billion, which was larger than the USD 11.8 billion surplus seen in December 2016. The external sector recovered notably in 2017 and the trade surplus rose from 2016’s USD 90.3 billion to USD 115.3 billion. The reading was supported by double-digit growth in exports, which surged 25.9% last year (2016: -16.7%). Imports also expanded at a quick pace, illustrating the economy’s recovery. Imports grew 24.8% in 2017 (2016: -1.3%). The analysts we surveyed this month project Russia’s exports to reach USD 383 billion in 2018. Going forward, panelists expect exports to reach USD 400 billion in 2019.

Please visit Focus for more information.

Consumer Price Index

 (end of period)

	2016				2017
	II quarter	III quarter	IV quarter	I quarter	II quarter
	percent of December of previous year
Consumer price index for products and services	103.3	104.1	105.4	101.0	102.3
food products (including alcoholic beverages)	103.2	102.4	104.6	101.2	103.4
non-food products	103.8	105.2	106.5	100.9	101.3
services	102.7	104.8	104.9	100.8	102.0

Sources: FocusEconomics and Federal State Statistics Service (Russia). 

The Veblen effect (where goods are desired for being over-priced) and when consumers prefer to buy more expensive items because they think that goods with a higher price tag are more exclusive and thus indicate status. We will be covering conspicuous consumption and theories surrounding such theories over the next few months in a special microeconomics series. 

The Veblen effect is one of a family of theoretically possible anomalies in the general law of demand in microeconomics. Other related effects include:

• The snob effect: expressed preference for goods because they are different from those commonly preferred; in other words, for consumers who want to use exclusive products, price is quality.
• The bandwagon effect: preference for a good increases as the number of people buying them increases (a psychological effect).
• The network effect: value of a good increases as the number of buyers or users increases (e.g., as the number of people with telephones or Facebook increased, the value of having a telephone or being on Facebook increased since the user could reach more people).
• The common law of business balance: low price of a good indicates that the producer may have compromised quality, that is, "you get what you pay for".
• The Hot-hand fallacy: stock buyers have been observed to fall prey to the hot-hand fallacy, preferring to buy more successful stocks and sell those that are less successful.

Some of these effects are discussed in a classic article by Leibenstein (1950).The concept of the counter-Veblen effect is less well known, although it logically completes the family.

Thorstein Veblen (Wiki)

At a glance and with a bevy of charts, we take a look at current business cycles, labor and the employment situation in America. "Employment continued to trend up in construction, food services and drinking places, health care and manufacturing. The strength of the U.S. labor market is evident from the most-recent Labor Department figures which showed that U.S. filings for unemployment benefits decreased by 10,000 to 210,000, the lowest since December 1969 (better than the estimation of 225,000)." - NASDAQ

THE EMPLOYMENT SITUATION -- JANUARY 2018 Total non-farm payroll employment increased by 200,000 in January, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in construction, food services and drinking places, health care, and manufacturing.

Household Survey Data In January, the unemployment rate was 4.1 percent for the fourth consecutive month. The number of unemployed persons, at 6.7 million, changed little over the month.

Healthcare, Food + Drink

Employment in food services and drinking places continued to trend up in January (+31,000). The industry has added 255,000 jobs over the past 12 months. Employment in health care continued to trend up in January (+21,000), with a gain of 13,000 in hospitals. In 2017, health care added an average of 24,000 jobs per month.

Housing + Construction

Construction added 36,000 jobs in January, with most of the increase occurring among specialty trade contractors (+26,000). Employment in residential building construction continued to trend up over the month (+5,000). Over the year, construction employment has increased by 226,000.

Data from: LTCI Economics, DB Research, Atlanta FED

A Quick Look At South Korea: 

February headline inflation rose to 1.4% year-on-year from 1.0% in the previous month, above expectations. While inflation moved back towards the lower end of the BOK target range of 1.5%-2.5%, it was still below the December 2017 figure. Core inflation also inched up to 1.2%. 

Headline CPI rose 0.8% from a month ago, the sharpest sequential rise since last year's lunar New Year holidays in Jan 2017. Food prices rose the sharpest, by 2.9%, adding 0.4pp to sequential growth, in reflection of holiday spending. Food inflation on a year-on-year basis accelerated to +2.2%, the first acceleration since Aug 2017. 

Sources: Goldman Sachs, Bloomberg, LTCI Economics

Serbia

The economy had a mixed performance in 2017, with slow economic growth in the first half of the year followed by an acceleration in the second half. A flash estimate released by the Statistical Institute on 31 January put year-on-year economic growth at 2.5% in the fourth quarter, up from 2.1% in the third quarter and placing overall economic growth at 1.9% in 2017. Moreover, customs data suggested that exports grew healthily in December, although the trade deficit still increased as imports grew at a faster pace. Meanwhile, on the political front, local elections will take place in Belgrade on 4 March. Some politicians from the ruling Progressive Party had called for holding snap parliamentary elections alongside them. But, in a move that should steady the political landscape, President Aleksandar Vucić said on 8 January that his Progressive Party does not plan to call snap elections this year. Increased government spending, particularly on wages, pensions and infrastructure investment, should support domestic demand in 2018. Moreover, the continuation of accommodative monetary policy should support the economy this year. However, although public debt is now on a downward trend, it remains large enough to be of concern. FocusEconomics panelists expect GDP growth to reach 3.1% in 2018, which is up 0.1 percentage points from last month’s forecast. For 2019, panelists again project growth of 3.1%.  Inflation accelerated from 2.8% in November to 3.0% in December. On 11 January, the National Bank of Serbia decided to maintain its key policy rate at 3.50% for the third consecutive month. FocusEconomics panelists see inflation averaging 2.9% in 2018. For 2019, our panelists expect inflation to rise to 3.3%.

Monetary Policy:
Consumer prices remained unchanged from the previous month in December, just as they did in November. According to the Statistical Institute, price increases for housing, water, electricity, gas and other fuels, transport, and recreation and culture were offset by lower prices for clothing and footwear, and food and non-alcoholic beverages. Inflation accelerated from 2.8% in November to 3.0% in December, precisely hitting the midpoint of the Central Bank’s target range. Annual average inflation climbed from 3.0% in November to 3.2% in December. Core inflation—which excludes volatile items including energy, food, alcohol and cigarettes—ticked down to 1.3% in December from 1.4% in November. The Central Bank has set its inflation target for this year and the next at 3.0% plus or minus 1.5 percentage points. FocusEconomics Consensus Forecast panelists expect inflation to average 2.9% in 2018, which is unchanged from last month’s forecast. For 2019, the panel sees inflation rising to 3.3%. Read More At FocusEconomics.

Kosovo

From The World Bank & Chaganomics Research

Kosovo is a parliamentary republic. It declared independence on February 17, 2008 and is recognized as an independent country by 114 out of 193 United Nations members and by 23 out of 28 EU members.

Kosovo is a potential candidate for EU membership, a process that was accelerated with the signing of the Stabilization Association Agreement with the EU in October 2015, in force since April 2016. The current Government, a coalition comprised of five larger political parties and several smaller ones, was voted into office on September 9, 2017. It controls a slim majority, only 61 out of 120 parliamentary seats.

Although Kosovo’s economic growth has outperformed its neighbors and been largely inclusive, it has not been sufficient to significantly reduce the high rates of unemployment; provide formal jobs, particularly for women and youth; or reverse the trend of large-scale outmigration. The current growth model relies heavily on remittances to fuel domestic consumption.

Kosovo’s growth strategy needs to be focused on addressing the infrastructure bottlenecks in energy, creating an environment more conducive to private sector development, equipping its young population with the skills demanded by employers, and building up governance and the rule of law to fully reap the benefits of EU integration, unleash productivity gains, and create quality jobs that foster inclusion.

Chaganomics: Republic of Kosovo Per Capita Income is a mix at $3,641.00 and $3,890.70 respectfully. 

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.