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Weekly Economic Update - 12 February 2021#
Electronic card transactions rose...#
Electronic card retail transaction values were up 1.9% in January from a year ago, driven by growth of 8.0% in spending on durables, indicating that overall demand remains resilient. Retail transactions volumes also showed continued resilience, with total retail transactions up 1.1% from January 2020. However, growth in spending remains uneven across industries (Figure 1), with hospitality spending down 4.9% from January 2020 and spending on core retail up 3.7%. Interestingly, the difference between current and pre-pandemic spending in the hospitality industry has narrowed somewhat in recent months.
Figure 1: Electronic card spending
Source: Stats NZ
While electronic card retail spending was higher compared to a year ago, spending has now eased for four consecutive months since October 2020, with spending in January down 0.4% from December. The resilience in demand seen over the second half of 2020 now appears to be easing.
…as inflation expectations rose#
Inflation expectations rose in the Reserve Bank's (RBNZ) January 2021 Survey of Expectations (Business), with both 1-year and 2-year inflation expectations rising, the latter to 1.9%, close to the mid-point of the Bank's 1-3% target band. The results in the Reserve Bank's survey are in line with responses in other surveys, such as the ANZ Business Outlook (Figure 2). The performance of the economy has been stronger than expected in the second half of 2020, with suggests higher inflationary pressure ahead.
Figure 2: Inflation expectations
Sources: Stats NZ, RBNZ, ANZ
Loan to Value Ratio (LVR) requirements to return in March#
The RBNZ confirmed that LVR restrictions would be reinstated from 1 March 2021 following their suspension in April 2020 in response to the COVID-19 pandemic. The RBNZ noted that financial stability risks had escalated since the time of its consultation with mortgage lenders in December, resulting in more restrictive policy settings being decided on. As of 1 March the LVR restrictions will be re-imposed at the same level they were set at prior to the onset of COVID-19, with a further tightening of investors' restrictions taking effect on 1 May. From 1 March, LVR restrictions for investors will be reinstated to a maximum of 5% of new lending at LVRs above 70%, further tightening to a maximum of 5% of new lending at LVRs above 60% on 1 May. From 1 March, LVR restrictions for owner-occupiers will be reinstated at a maximum of 20% of new lending at LVRs above 80%, with no change on 1 May.
US activity data mixed…#
Employment in the US rose by a weaker-than-expected 49,000 in January, while there were net downward revisions of 159,000 to the previous two months. The unemployment rate fell from 6.7% to 6.3%, while there was a marginal fall in the participation rate from 61.5% to 61.4% (Figure 3).
Figure 3: US labour market
More evidence of a slowdown in momentum came from the January National Federation of Independent Business (NFIB) index, which fell to 95.0 from 95.9 in the previous month, against expectations of an increase to 97.0 and the lowest reading in eight months. In contrast, the December Job Openings and Labor Turnover Survey (JOLTS) showed job vacancies rising to 6.6 million, the highest level since July 2020, and in line with pre-pandemic levels of 6.6 - 7.3 million.
…as inflation remains weak in US, China#
US CPI increased by 0.3% in January compared to the previous month due to rising energy prices, which kept the annual rate steady at 1.4%. Annual core CPI inflation (all items less food and energy) fell from 1.6% to 1.4%. Federal Reserve Chairman Jerome Powell said in a speech on Wednesday that he is not worried about inflation increasing at a rapid rate, and that the central bank's focus continues to be to get back to a strong labour market.
In China, annual consumer price inflation fell from 0.2% in December to -0.3% in January, mainly due to base effects. Deflation is however expected to be short-lived, as base effects are reversed in the coming months, and with demand-side pressures continuing to build. Annual producer price inflation in China returned to positive territory for the first time since January 2020, increasing from -0.4% to 0.3%.
Australian confidence levels remain high#
The National Australia Bank's (NAB) January Business Survey showed business confidence rose by 5 points (pts) to 10 pts, even though the business conditions index pulled back from 16 to 7 pts following a strong increase in December (Figure 4). Both indices remain above their long-term averages. Although all sub-indices of the conditions index eased, they remain in expansionary territory. Conditions remain strongest in retail and weakest in construction. Capacity utilisation rose 0.2 pts to 81.0% and has now returned to pre-pandemic levels.
Meanwhile, the Westpac-Melbourne Institute Index of Consumer Sentiment rebounded by 1.9% to 109.1 pts in February (Figure 4), supported by improved perceptions of future economic conditions. The index is now 14.2% higher than pre-pandemic levels. Expectations of future house price gains increased by 6.5%. However, there was a 3.6% fall in the 'time to buy a dwelling' index, bringing it 8.6% below its November peak. This suggests that recent increases in house prices may be starting to weigh on purchasing sentiment.
Figure 4: Australian confidence
|Date||Key upcoming NZ data||Previous|
|15 Feb||REINZ House Price Index (Jan)||17.1%|
|16 Feb||International travel and migration (Dec)|
|17 Feb||Productivity Statistics (Mar 2020)|
High-Frequency Indicators (Domestic)#
Source: Waka Kotahi NZ Transport Agency
Source: Waka Kotahi NZ Transport Agency
Source: Electricity Authority
Source: Marketview data via MBIE
Jobseeker (JS) and Income Support Recipients#
People Movements at Selected Locations#
High-Frequency Indicators (Global)#
Trade Weighted Index#
US Activity and Equities#
Sources: Federal Reserve Bank of New York, Haver
Sources: World Health Organisation/Haver
World Commodity Prices#
|Real Production GDP1||qpc||0.7||0.1||-1.2||-11.0||14.0||...|
|Current account balance (annual)||%GDP||-3.7||-3.3||-2.8||-1.8||-0.8||...|
|Merchandise terms of trade||apc||0.9||7.1||5.4||6.3||-0.4||...|
|LCI salary & wage rates - total2||apc||2.5||2.6||2.5||2.1||1.8||1.6|
|QES average hourly earnings - total2||apc||4.2||3.6||3.6||3.0||3.6||4.2|
|Core retail sales volume||apc||5.4||3.3||4.0||-11.7||7.7||...|
|Total retail sales volume||apc||4.5||3.3||2.3||-14.2||8.3||...|
|WMM - consumer confidence3||Index||103.1||109.9||104.2||97.2||95.1||106.0|
|QSBO - general business situation1,4||net%||-37.1||-30.8||-67.9||-57.6||-37.6||-16.3|
|QSBO - own activity outlook1,4||net%||-0.6||2.9||-12.9||-24.1||0.5||9.4|
|Monthly Indicators||Aug 20||Sep 20||Oct 20||Nov 20||Dec 20||Jan 21|
|Merchandise trade balance (12 month total)||NZ$m||1,369||1,655||2,223||3,300||2,937||...|
|Dwelling consents - residential||apc||-3.3||7.7||7.2||19.9||26.9||...|
|House sales - dwellings||apc||27.7||41.9||30.0||33.0||36.6||...|
|REINZ - house price index||apc||9.6||10.8||13.2||15.0||17.1||...|
|Estimated net migration (12 month total)||people||76,823||69,556||60,445||52,373||...||...|
|ANZ NZ commodity price index||apc||-3.9||-6.5||-5.6||-10.9||-5.9||-2.2|
|ANZ world commodity price index||apc||-2.8||-3.1||-2.3||-5.5||-0.4||4.6|
|ANZBO - business confidence||net%||-41.8||-28.5||-15.7||-6.9||9.4||...|
|ANZBO - activity outlook||net%||-17.5||-5.4||4.7||9.1||21.7||...|
|ANZ-Roy Morgan - consumer confidence||net%||100.2||100.0||108.7||106.9||112.0||113.8|
|Weekly Benefit Numbers||1 Jan||8 Jan||15 Jan||22 Jan||29 Jan||5 Feb|
|Health Condition and Disability||number||77,619||77,763||77,919||77,958||78,165||78,066|
|COVID-19 Income Relief Payment||number||2,097||2,070||1,389||660||342||...|
|NZ exchange and interest rates5|
|Trade weighted index (TWI)||index||75.2||74.9||...||75.3||75.1||...|
|Official cash rate (OCR)||%||0.25||0.25||0.25||0.25||0.25||...|
|90 day bank bill rate||%||0.28||0.28||...||0.29||0.29||...|
|10 year govt bond rate||%||1.35||1.37||...||1.40||1.40||...|
|VIX volatility index||index||21.8||20.9||21.2||21.6||22.0||...|
|AU all ords||index||7,038||7,113||7,161||7,102||7,134||...|
|US interest rates|
|3 month OIS||%||0.08||0.08||0.07||0.08||...||...|
|3 month Libor||%||0.19||0.19||0.20||0.20||...||...|
|10 year govt bond rate||%||1.15||1.19||1.19||1.18||1.15||...|
Data in Italic font are provisional.
... Not available.
(1) Seasonally adjusted
(2) Ordinary time, all sectors
(3) Westpac McDermott Miller
(4) Quarterly Survey of Business Opinion
(5) Reserve Bank (11am)
(6) Daily close
|Country||Indicator||Jul 20||Aug 20||Sep 20||2020Q3||Oct 20||Nov 20||DEc 20||2020Q4||Jan 21||Feb 21|
|Retail sales value||apc||2.7||3.6||6.1||5.4||3.7||2.9||...||...|
|Retail sales value||apc||-2.9||-1.9||-8.7||6.4||0.6||-0.3||...||...|
|Retail sales volume||apc||0.2||4.4||2.5||4.3||-2.2||0.6||...||...|
|Retail sales volume||apc||1.1||2.7||4.5||5.9||2.1||2.9||...||...|
|Retail sales value||apc||12.8||5.4||6.6||7.7||12.1||10.3||...||...|
(1) Seasonally adjusted
(2) Case-Shiller Home Price Index 20 city
(3) The Conference Board Consumer Confidence Index
(4) Cabinet Office Japan
(5) European Commission
(6) Nationwide House Price Index
(7) Australian Bureau of Statistics
(8) Melbourne/Westpac Consumer Sentiment Index