Weekly economic update

Weekly Economic Update - 19 February 2021

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Weekly Economic Update 19 February 2021#

Alert Levels increase in response to new cases#

Higher alert levels were reintroduced for (initially) three days this week following the emergence of three cases in the community in Auckland over the weekend. Alert levels were raised to Level 3 in Auckland and Level 2 for the rest of New Zealand.

On Wednesday, three further cases were found in the community, but it was decided that the current outbreak has been contained. As a result, Auckland's alert level has dropped to Level 2, and the rest of the country returned to Level 1. Alert level settings will be revisited on Monday 22 February.

Manufacturing strength continues…#

The BNZ-BusinessNZ Performance of Manufacturing Index (PMI) rose strongly in January, up 9.2 points to 57.5 and above the long-term average of 53.0 for the index. All major sub-index values rose, and new orders were particularly strong, up 12.1 points.

…countered by weakness in services…#

However, the Performance of Services Index (PSI) fell by 1.2 points to 47.9, in contractionary territory and below the long-term average of 53.8. New orders remained in expansion mode but sales and employment both fell, down 4.6 points and 5.9 points respectively.

Respondents to the survey cited influences from the Christmas period, ongoing COVID-19 related issues (including freight challenges) and a slower return to business-as-usual post holidays all contributing to the ongoing trend of contraction in services activity.

…leaving the aggregate story unchanged#

The BNZ-BusinessNZ GDP-weighted Combined Performance Index (PCI) was unchanged from December in January at 49.2. This series has been trending down since late 2017, however there are signs that this downward trend has been slowing over the past few months (Figure 1).

Figure 1: GDP and PCI

Figure 1: GDP and PCI

Source: Stats NZ, BNZ-BusinessNZ

Modest growth in NZ Activity Index#

The latest New Zealand Activity Index (NZAC) continues to show modest growth. Activity in January was up 0.8% compared to January 2020. The growth is slower than in the previous months due to contradicting signals from the constituent indicators. While electronic card spending and heavy traffic declined compared to January 2020, the PMI is at its highest level since August 2020 and is much higher than the same month last year.

The latest NZAC result may indicate that the recovery in activity following COVID-19 related disruptions, is starting to plateau.

Figure 2: New Zealand Activity Index

Figure 2: New Zealand Activity Index

Sources: RBNZ/Stats NZ/The Treasury

House prices hold up as sales fall…#

The strong momentum in the housing market observed at the end of 2020 continued into the first month of 2021, with house prices rising 1.8% in January to be up 19.2% compared to a year ago. This is the highest annual growth rate since June 2004 (Figure 3). The median price of a house in New Zealand is now $730,000, compared to $612,000 in January 2020, a difference of around 19%.

National house sales fell 28.9% in January after recording a 10.5% increase in December. However, for the three months to January 2021, house sales were still over 30% higher than the same period a year ago. Demand in the market remains high, with low interest rates providing support, and median days to sell in January fell to 35, the lowest level for the month of January in 17 years.

Figure 3: House prices and sales

Figure 3: House prices and sales

Source: REINZ

The continued uncertainty relating to the economic recovery and household incomes may weigh on house price growth in the quarters ahead, along with the reinstatement of the loan-to-value-ratio restrictions.

...and dairy prices rise again#

Dairy prices rose again at this week's GlobalDairyTrade auction, up 3.0% from the previous event (up 2.1% in NZD terms). All products offered recorded gains. Whole milk powder prices rose 4.3%, driven by higher demand from China, and skim milk prices were up 0.3%.

…and net migration remains low#

Annual net migration continued to fall, to a provisional net gain of 44,100 in the year ended December 2020, as border restrictions continue to limit migration. Provisional estimates for the year ended December consist of 85,800 arrivals (of which 33,500 were NZ citizens) and 41,600 departures (of which 11,700 were NZ citizens).

Figure 4: Net Migration (annual)

Figure 4: Net Migration (annual)

Sources: Stats NZ

Disposable incomes were rising prior to COVID#

The 2019/20 Household Economic Survey (HES) showed that median annual household income after housing costs rose by 7.0% in the year to June 2020. Data for the “year to June 2020” was derived from the nine months from July 2019 to March 2020, due to Statistics NZ being unable to collect data during the COVID-19 lockdown.

Rent payments rose 2.0% while mortgage payments rose 4.5% as higher principal repayments offset lower interest payments. The percentage of people living in low-income households (disposable income after housing costs less than 50% of the median) rose from 16.6% to 17.1%.

This data release does not reflect how COVID-19 affected household incomes due to the timing of the survey.

Japan GDP beats expectations…#

Japan's GDP rose 3.0% in the December 2020 quarter compared to the September quarter, to be down just 1.1% on the December 2019 quarter (Figure 5). GDP in Thailand and Indonesia rose 1.3% and 2.6% respectively, with Thailand ending up 4.2% down on pre-pandemic GDP levels and Indonesia down 2.2%. Meanwhile, Malaysia's GDP contracted 0.3% amid heightened restrictions, with December quarter GDP down 3.5% on the December 2019 quarter.

Figure 5: GDP in selected Asian countries

Figure 5: GDP in selected Asian countries

Source: Haver

…and UK economy proves resilient#

UK GDP rose 1.0% in the December 2020 quarter compared to the September quarter, showing surprising resilience to November's four-week national lockdown. Output increased across each of the services, production and construction industries. There was a further recovery in government consumption and, to a lesser extent, business investment, reflecting the easing of public health restrictions. The level of GDP in the December 2020 quarter was 7.8% below the same quarter in 2019, however, and the 9.9% contraction in annual GDP was the largest on record.

In the euro area, employment increased by 0.3% in the quarter, with over half a million jobs being created despite renewed lockdowns and a 0.6% quarterly decline in GDP. Total job numbers remained over 3 million down on 2019, however.

Fed notes stronger outlook as vaccines roll out#

Minutes from the 27 January meeting of the United States Federal Open Markets Committee show that officials believe the outlook has improved considerably, with fiscal stimulus and widespread vaccination expected to boost growth this year. Monetary stimulus is likely to remain for some time, however, as officials noted that temporary inflationary factors would be looked through. Meanwhile, yields on 10-year US Treasury bonds rose to the highest level since February 2020, amid surprisingly strong outturns in January retail sales, industrial production and producer prices.

Data from Bloomberg show that 57.4 million COVID-19 vaccine doses have been administered across the United States, with an average of 1.6 million doses per day in the last week. At the current rate, it will take an estimated 9 months to cover 75% of the population with a two-dose vaccine. Globally, 186 million doses have been administered across 82 countries.

Australian employment rises, hours worked fall#

Australia's unemployment rate fell to 6.4% in January (Figure 6), a decrease of 0.2 percentage points (ppt) from December. The fall was driven by a 0.2% rise in employment, but also by a 0.1 ppt decrease in the labour force participation rate. The number of employed people was down 0.4% compared to January 2020. Hours worked decreased by 4.9% compared to December, falling back to the lowest level since June last year. The fall was largely driven by workers taking more annual leave than usual, likely due to holiday plans being disrupted by lockdowns earlier in the year.

Figure 6: Australian monthly employment and hours worked

Figure 6: Australian monthly employment and hours worked

Source: Haver

Date Key NZ Data Previous (apc)
23 Feb Retail trade survey (Q4) +28.0% (qpc)
25 Feb ANZ Business Outlook (Feb) +10.6 (net %)
26 Feb ANZ Roy Morgan Consumer Confidence (Feb) 113.8 (index)
26 Feb Overseas Merchandise Trade (Jan) $2.9b (annual balance)

High-Frequency Indicators (Domestic)#

Traffic Movement#

Traffic Movement

Source: Waka Kotahi NZ Transport Agency

Freight Movement#

Freight Movement

Source: Waka Kotahi NZ Transport Agency

Electricity Demand#

Electricity Demand

Source: Electricity Authority

Retail Spending#

Retail Spending

Source: Paymark and Verifone data via Data Ventures

Jobseeker (JS) and Income Support Recipients#

Jobseeker (JS) and Income Support Recipients

Source: MSD

People Movements at Selected Locations#

People Movements at Selected Locations

Source: Google

High-Frequency Indicators (Global)#

Trade Weighted Index#

Trade Weighted Index

Source: RBNZ

Volatility Index#

Volatility Index

Source: Haver

US Activity and Equities#

US Activity and Equities

Sources: Federal Reserve Bank of New York, Haver

Labour Markets#

Labour Markets

Source: Haver

COVID-19 Cases#

COVID-19 Cases

Sources: World Health Organisation/Haver

World Commodity Prices#

World Commodity Prices

Source: ASB

Tables#

Quarterly Indicators   2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4
Real Production GDP1 qpc 0.7 0.1 -1.2 -11.0 14.0 ...
  aapc 2.8 2.3 1.6 -1.7 -2.2 ...
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 ...
CPI  inflation qpc 0.7 0.5 0.8 -0.5 0.7 0.5
  apc 1.5 1.9 2.5 1.5 1.4 1.4
Employment (HLFS)1 qpc 0.6 0.4 1.0 -0.3 -0.7 0.6
Unemployment rate1 % 4.2 4.1 4.2 4.0 5.3 4.9
Participation rate1 % 70.7 70.4 70.7 69.9 70.1 70.2
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 34.0 45.8 3.2
REINZ - house price index apc 9.7 10.8 13.2 16.0 17.9 19.2
Estimated net migration (12 month total) people 76,274 69,341 60,060 52,019 44,127 ...
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   8-Jan 15-Jan 22-Jan 29-Jan 5-Feb 12-Feb
Jobseeker Support number 213,756 213,852 213,357 213,006 211,806 211,026
Work Ready number 135,990 135,936 135,399 134,841 133,743 132,858
Health Condition and Disability number 77,763 77,919 77,958 78,165 78,066 78,171
COVID-19 Income Relief Payment number 2,070 1,389 660 342 ... ...
Full-time number 1,848 1,254 585 297 ... ...
Part-time number 225 138 78 45 ... ...
Daily Indicators   Wed
10/02/2021
Thu
11/02/2021
Fri
12/02/2021
Mon
15/02/2021
Tue
16/02/2021
Wed
17/02/2021
NZ exchange and interest rates5              
NZD/USD $ 0.7233 0.7206 0.7226 0.7222 0.7237 0.7185
NZD/AUD $ 0.9352 0.9341 0.9324 0.9303 0.9296 0.9285
Trade weighted index (TWI) index 75.1 74.8 74.9 74.9 74.9 74.6
Official cash rate (OCR) % 0.25 0.25 0.25 0.25 0.25 0.25
90 day bank bill rate % 0.29 0.29 0.29 0.3 0.29 0.28
10 year govt bond rate % 1.40 1.37 1.31 1.34 1.42 1.51
Share markets6              
Dow Jones index 31,438 31,431 31,458 ... 31,523 31,613
S&P 500 index 3,910 3,916 3,935 ... 3,933 3,931
VIX volatility index index 22.0 21.3 20.0 ... 21.5 21.5
AU all ords index 7,134 7,122 7,081 7,150 7,189 7,159
NZX 50 index 12,830 12,761 12,590 12,511 12,611 12,674
US interest rates              
3 month OIS % 0.08 0.08 0.08 0.08 0.08 ...
3 month Libor % 0.20 0.20 0.19 0.19 0.19 ...
10 year govt bond rate % 1.15 1.16 1.20 ... 1.30 1.29
Commodity prices6              
WTI oil US$/barrel 58.68 58.24 59.47 ... 60.05 ...
Gold US$/ounce 1,843 1,840.10 1,816.35 1,817.30 1,794.25 ...
CRB Futures index 467 466.93 470.10 ... 476.16 ...

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 Jan-21 Jan-21 Feb-21
United
States

[9.6%
share of
total goods
exports]
GDP1 qpc       7.5       1.0    
Industrial production1 mpc 4.2 1.0 -0.1   1.1 0.9 1.3   0.9 ...
CPI apc 1.0 1.3 1.4   1.2 1.2 1.4   1.4 ...
Unemployment rate1 % 10.2 8.4 7.8   6.9 6.7 6.7   6.3 ...
Employment change1 000s 1726.0 1583.0 716.0   680.0 264.0 -227.0   49.0 ...
Retail sales value apc 2.7 3.6 6.1   5.4 3.8 2.5   7.4 ...
House prices2 apc 4.2 5.4 6.7   8.0 9.1 ...   ... ...
PMI manufacturing1 index 53.7 55.6 55.7   58.8 57.7 60.5   58.7 ...
Consumer confidence1,3 index 91.7 86.3 101.3   101.4 92.9 87.1   89.3 ...
Japan
[6.1%]
GDP1 qpc       5.3       3.0    
Industrial production1 mpc 8.7 1.0 3.9   4.0 -0.5 -1.0   ... ...
CPI apc 0.3 0.1 0.0   -0.4 -0.9 -1.1   ... ...
Unemployment rate1 % 2.9 3.0 3.0   3.1 2.9 2.9   ... ...
Retail sales value apc -2.9 -1.9 -8.7   6.4 0.6 -0.2   ... ...
PMI manufacturing1 index 45.2 47.2 47.7   48.7 49.0 50.0   49.8 ...
Consumer confidence1,4 index 29.5 29.3 32.8   33.3 33.6 31.8   30.0 ...
Euro area
[5.5%]
GDP1 qpc       12.4       -0.6    
Industrial production1 mpc 5.1 0.8 -0.1   2.5 2.6 -1.6   ... ...
CPI apc 0.4 -0.2 -0.3   -0.3 -0.3 -0.3   ... ...
Unemployment rate1 % 8.6 8.6 8.6   8.4 8.3 8.3   ... ...
Retail sales volume apc 0.2 4.4 2.5   4.3 -2.2 0.6   ... ...
PMI manufacturing1 index 51.8 51.7 53.7   54.8 53.8 55.2   54.8 ...
Consumer confidence5 index -14.9 -14.6 -13.6   -15.5 -17.6 -13.8   -15.5 ...
United
Kingdom

[2.7%]
GDP1 qpc       16.1       1.0    
Industrial production1 mpc 5.4 0.5 0.7   0.9 0.3 0.2   ... ...
CPI apc 1.1 0.2 0.6   0.7 0.4 ...   ... ...
Unemployment rate1 % 4.3 4.5 4.8   4.9 5.0 ...   ... ...
Retail sales volume apc 1.1 2.7 4.5   5.9 2.1 2.9   ... ...
House prices6 apc 1.5 3.7 5.0   5.8 6.5 7.3   6.4 ...
PMI manufacturing1 index 53.3 55.2 54.1   53.7 55.6 57.5   54.1 ...
Consumer confidence1,5 index -27.0 -27.0 -25.0   -31.0 -33.0 -26.0   -28.0 ...
Australia
[15.8%]
GDP1 qpc       3.3       ...    
CPI apc       0.7       0.9    
Unemployment rate1 % 7.5 6.8 6.9   7.0 6.8 6.6   ... ...
Retail sales value apc 12.8 5.4 6.6   7.7 12.1 10.3   ... ...
House Prices7 apc       5.0       ...    
PMI manufacturing1 index 53.5 49.3 46.7   56.3 52.1 55.3   55.3 ...
Consumer confidence8 index 87.9 79.5 93.8   105.0 107.7 112.0   107.0 109.1
China
[24.3%]
GDP apc       4.9       6.5    
Industrial production apc 4.8 5.6 6.9   6.9 7.0 7.3   ... ...
CPI apc 2.7 2.4 1.7   0.5 -0.5 0.2   -0.3 ...
PMI manufacturing1 index 51.1 51.0 51.5   51.4 52.1 51.9   51.3 ...
South
Korea

[3.0%]
GDP1 qpc       2.1       1.1    
Industrial production1 mpc 1.9 -0.4 5.6   -1.2 0.3 3.7   ... ...
CPI apc 0.3 0.7 1.0   0.1 0.6 0.5   0.6 ...

(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