Weekly economic update

Weekly Economic Update - 19 March 2021

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Weekly Economic Update 19 March 2021#

Regional Activity Indicators released#

The Regional Activity Indices (RAIs) were updated this week for the February month. Each RAI is a composite index that summarises six monthly indicators of economic activity in that region. Activity growth in the northernmost regions of the North Island (Northland, Auckland and Waikato) fell marginally in February as a result of the temporary escalations of alert levels in Auckland. This was reflected by falls in consumer card spending, light traffic, and electricity grid demand (Figure 1).

Figure 1: Auckland Activity Index

Figure 1: Auckland Activity Index

Sources: The Treasury/Various

For the rest of New Zealand, activity remained little-changed from January. Activity growth in lower South Island regions remains below average, although a number of these regions did display a modest uptick in February (Canterbury, West Coast, Otago and Southland).

Dairy prices retreat from recent highs#

The GlobalDairyTrade (GDT) auction price index GDT result from Tuesday night ended a run of 8 consecutive increases, falling 3.8% following a 15.0% rise in the prior auction (Figure 2). While whole milk powder prices dipped 6.2% (following the 21.0% increase at the last auction), they remain at levels not seen since 2014. Butter prices also retreated somewhat (down 2.8%) but remain at 3-year highs. These elevated price levels support a continued positive outlook for farmgate milk prices for the 2020/21 season.

Figure 2: GlobalDairyTrade auction prices

Figure 2: GlobalDairyTrade auction prices

Sources: GlobalDairyTrade/Haver

Current account deficit widens…#

New Zealand’s seasonally adjusted quarterly current account deficit widened by $1.6 billion in the December 2020 quarter, to reach $2.1 billion. The increase in the deficit was driven by deteriorations in both the goods and services balances, as goods imports recovered further and services exports fell.

Figure 3: Current account deficit (annual)

Figure 3: Current account deficit (annual)

Source: Stats NZ

…and GDP was weaker than expected#

December quarter GDP was weaker than expected, falling 1.0% (following a record increase of 13.9% in the September quarter). This quarter’s result was driven by a decline in activity in construction services and non-residential building as well as a 5.0% fall in the tourism-impacted retail, accommodation and restaurants industries. On an annual basis, GDP for the year ended December 2020 fell 2.9%.

Mixed data in the US…#

Retail sales and industrial production in the United States declined by 3.3% and 2.2%, respectively, in February compared to the previous month, partly due to severe weather conditions impacting central states (Figure 4). The decline should therefore be reversed in March, supported by the recently disbursed US$1,400 stimulus cheques to households. The January surge in retail sales was revised up by 2.3 percentage points to 7.6%. However, there are concerns that global supply chain issues will delay the ability of manufacturing production to catch up with goods demand.

Figure 4: Industrial production and retail sales

Figure 4: Industrial production and retail sales

Source: Haver

…and China…#

Retail sales in China declined by an average 0.4% in January and February compared to December, when growth was 1.3%. This reflects travel restrictions that were put in place during the Lunar New Year period to combat an outbreak of COVID-19 in the community. Monthly growth in industrial production held steady at 0.7%, supported by stronger external demand and an increase in hours worked. Investment spending grew by 2.5% on a monthly basis, the strongest growth since August last year, driven by a further increase in property investment.

…as US Fed raises growth forecasts#

At its Federal Open Market Committee (FOMC) meeting, the US Federal Reserve (Fed) left its policy settings unchanged and upgraded its forecasts for economic activity. Real GDP is forecast to expand by 6.5% in 2021, up from 4.2% in the December projections, while the unemployment rate forecast was downgraded from 5.0% to 4.5%. Higher economic growth is expected to have only a transitory effect on inflation, rising to 2.4% by the end of 2021 before falling to just above 2.0% in 2022-23. While most FOMC participants still see the policy interest rate on hold until the end of 2023, four expect tightening to commence in 2022 (up from one in December), and seven expect an increase in 2023 (up from five).

Australian unemployment declines further#

The unemployment rate declined from 6.3% in January to 5.8% in February, while the participation rate remained steady at 66.1% (Figure 5). Monthly hours worked increased by 6.2% following the sharp fall in January, while the underemployment rate increased from 8.1% to 8.5%, compared to a pre-pandemic rate of 8.2%.

Figure 5: Australia labour market

Figure 5: Australia labour market

Source: Haver

Vaccine concerns in Europe#

A number of European countries suspended the AstraZeneca vaccine rollout this week owing to concerns about possible serious side effects. After the European Medicines Agency deemed it "safe and effective", Germany, France, Spain, and Italy will recommence its use. The pausing of the vaccine rollout has added to existing concerns about Europe’s progress lagging other developed markets owing to supply shortages. COVID-19 infection rates have been rising recently in Italy and Germany, with the former going into another lockdown from 15 March to 6 April.

Date Key upcoming NZ data Previous
24 Mar Overseas Merchandise Trade $626 million (deficit)

High-Frequency Indicators (Domestic)#

Traffic Movement#

Traffic Movement

Source: Waka Kotahi NZ Transport Agency

Freight Movement#

Freight Movement

Source: Waka Kotahi NZ Transport Agency

Spending by Region#

Spending by Region

Source: Marketview data via MBIE

Spending by Industry#

Spending by Industry

Source: Marketview data via MBIE

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

Regional Activity Charts, part 1#

Northland#

Northland Regional Activity Index - 19 March 2021

Auckland#

Auckland Regional Activity Index - 19 March 2021

Waikato#

Waikato Regional Activity Index - 19 March 2021

Bay of Plenty#

Bay of Plenty Regional Activity Index - 19 March 2021
Note
  1. All component indicators (displayed in light grey) have been standardised in the same way as the RAI itself (ie, to have mean = 0 and standard deviation = 1). This allows for all the series to be presented on the same scale – making the co-movements of interest more readily apparent. These standardised inputs can be viewed and downloaded alongside the RAIs on the Stats NZ COVID-19 data portal.

Regional Activity Charts, part 2#

Gisborne#

Gisborne Regional Activity Index - 19 March 2021

Hawke's Bay#

Hawke's Bay Regional Activity Index - 19 March 2021

Taranaki#

Taranaki Regional Activity Index - 19 March 2021

Manawatū-Whanganui#

Manawatu-Whanganui Regional Activity Index - 19 March 2021

Wellington#

Wellington Regional Activity Index - 19 March 2021
Note
  1. All component indicators (displayed in light grey) have been standardised in the same way as the RAI itself (ie, to have mean = 0 and standard deviation = 1). This allows for all the series to be presented on the same scale – making the co-movements of interest more readily apparent. These standardised inputs can be viewed and downloaded alongside the RAIs on the Stats NZ COVID-19 data portal.

Regional Activity Charts, part 3#

Tasman/Nelson/Marlborough#

Tasman/Nelson/Marlborough Regional Activity Index - 19 March 2021

Canterbury#

Canterbury Regional Activity Index - 19 March 2021

West Coast#

West Coast Regional Activity Index - 19 March 2021

Otago#

Otago Regional Activity Index - 19 March 2021

Southland#

Southland Regional Activity Index - 19 March 2021
Note
  1. All component indicators (displayed in light grey) have been standardised in the same way as the RAI itself (ie, to have mean = 0 and standard deviation = 1). This allows for all the series to be presented on the same scale – making the co-movements of interest more readily apparent. These standardised inputs can be viewed and downloaded alongside the RAIs on the Stats NZ COVID-19 data portal.

Tables#

Quarterly Indicators   2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4
Real Production GDP1 qpc 0.7 0.1 -1.2 -11.0 13.9 -1.0
  aapc 2.8 2.4 1.7 -1.7 -2.3 -2.9
Current account balance (annual) %GDP -3.7 -3.3 -2.8 -1.8 -0.8 -0.8
Merchandise terms of trade apc 0.9 7.1 5.4 6.3 -0.3 -1.7
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 4.2
Total retail sales volume apc 4.5 3.3 2.3 -14.2 8.3 4.8
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   Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21
Merchandise trade balance (12 month total) NZ$m 1,655 2,223 3,286 2,975 2,745 ...
Dwelling consents - residential apc 7.7 7.2 19.9 26.9 18.0 ...
House sales - dwellings apc 41.9 30.0 34.0 46.3 6.2 14.6
REINZ - house price index apc 10.8 13.2 16.0 17.8 18.9 21.4
Estimated net migration (12 month total) people 69,341 60,060 52,019 44,127 ... ...
ANZ NZ commodity price index apc -6.5 -5.6 -10.9 -5.9 -1.6 0.1
ANZ world commodity price index apc -3.1 -2.3 -5.5 -0.4 5.2 11.1
ANZBO - business confidence net% -28.5 -15.7 -6.9 9.4 ... 7.0
ANZBO - activity outlook net% -5.4 4.7 9.1 21.7 ... 21.3
ANZ-Roy Morgan - consumer confidence net% 100.0 108.7 106.9 112.0 113.8 113.1
Weekly Benefit Numbers   5 Feb 12 Feb 19 Feb 26 Feb 5 Mar 12 Mar
Jobseeker Support number 211,806 211,026 210,573 208,335 206,541 205,446
Work Ready number 133,743 132,858 132,234 130,113 128,415 127,272
Health Condition and Disability number 78,066 78,171 78,339 78,219 78,126 78,174
COVID-19 Income Relief Payment number 0 ... ... ... ... ...
Full-time number 0 ... ... ... ... ...
Part-time number 0 ... ... ... ... ...
Daily Indicators   Wed
10/03/21
Thu
11/03/21
Fri
12/03/21
Mon
15/03/20
Tue
16/03/21
Wed
17/03/21
NZ exchange and interest rates5              
NZD/USD $ 0.7167 0.7193 0.7228 0.7197 0.7199 0.7186
NZD/AUD $ 0.9303 0.9309 0.9274 0.9269 0.9296 0.9291
Trade weighted index (TWI) index 75.2 75.4 75.4 75.3 75.4 75.3
Official cash rate (OCR) % 0.25 0.25 0.25 0.25 0.25 0.25
90 day bank bill rate % 0.33 0.32 0.32 0.32 0.33 0.33
10 year govt bond rate % 1.82 1.77 1.69 1.79 1.80 1.73
Share markets6              
Dow Jones index 32,297 32,486 32,779 32,953 32,826 33,015
S&P 500 index 3,899 3,939 3,943 3,969 3,963 3,974
VIX volatility index index 22.6 21.9 20.7 20.0 19.8 19.2
AU all ords index 6,947 6,953 7,015 7,019 7,079 7,048
NZX 50 index 12,252 12,272 12,427 12,592 12,689 12,622
US interest rates              
3 month OIS % 0.07 0.07 0.07 0.07 0.07 ...
3 month Libor % 0.18 0.18 0.19 0.18 0.19 ...
10 year govt bond rate % 1.53 1.54 1.64 1.62 1.62 1.63
Commodity prices6              
WTI oil US$/barrel 64.44 66.02 65.59 65.36 64.82 ...
Gold US$/ounce 1,716 1,724.25 1,704.80 1,723.65 1,735.00 ...
CRB Futures index 495 498.79 496.46 495.48 496.62 ...

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   Aug 20 Sep 20 2020Q3 Oct 20 Nov 20 Dec 20 2020Q4 Jan 21 Feb 21 Mar 21
United
States

[9.6%
share of
total goods
exports]
GDP1 qpc     7.5       1.0      
Industrial production1 mpc 1.0 -0.1   1.0 0.9 1.0   1.1 -2.2 ...
CPI apc 1.3 1.4   1.2 1.2 1.4   1.4 1.7 ...
Unemployment rate1 % 8.4 7.8   6.9 6.7 6.7   6.3 6.2 ...
Employment change1 000s 1583.0 716.0   680.0 264.0 -306.0   166.0 379.0 ...
Retail sales value apc 3.6 6.1   5.4 3.8 2.3   9.5 6.3 ...
House prices2 apc 5.4 6.7   8.1 9.2 10.1   ... ... ...
PMI manufacturing1 index 55.6 55.7   58.8 57.7 60.5   58.7 60.8 ...
Consumer confidence1,3 index 86.3 101.3   101.4 92.9 87.1   88.9 91.3 ...
Japan
[6.1%]
GDP1 qpc     5.3       2.8      
Industrial production1 mpc 1.0 3.9   4.0 -0.5 -1.0   4.3 ... ...
CPI apc 0.1 0.0   -0.4 -0.9 -1.1   -0.6 ... ...
Unemployment rate1 % 3.0 3.0   3.1 3.0 3.0   2.9 ... ...
Retail sales value apc -1.9 -8.7   6.4 0.6 5.0   2.7 ... ...
PMI manufacturing1 index 47.2 47.7   48.7 49.0 50.0   49.8 51.4 ...
Consumer confidence1,4 index 29.3 32.8   33.3 33.6 31.8   30.0 33.7 ...
Euro area
[5.5%]
GDP1 qpc     12.5       -0.7      
Industrial production1 mpc 0.9 0.1   2.5 2.2 -0.1   0.8 ... ...
CPI apc -0.2 -0.3   -0.3 -0.3 -0.3   0.9 0.9 ...
Unemployment rate1 % 8.7 8.6   8.4 8.1 8.1   8.1 ... ...
Retail sales volume apc 4.5 2.5   4.4 -1.9 0.9   -6.4 ... ...
PMI manufacturing1 index 51.7 53.7   54.8 53.8 55.2   54.8 57.9 ...
Consumer confidence5 index -14.6 -13.6   -15.5 -17.6 -13.8   -15.5 -14.8 ...
United
Kingdom

[2.7%]
GDP1 qpc     16.1       1.0      
Industrial production1 mpc 0.5 0.7   0.9 0.3 0.2   -1.5 ... ...
CPI apc 0.2 0.6   0.7 0.4 ...   ... ... ...
Unemployment rate1 % 4.5 4.8   4.9 5.0 5.1   ... ... ...
Retail sales volume apc 2.7 4.5   6.0 2.3 3.1   -5.9 ... ...
House prices6 apc 3.7 5.0   5.8 6.5 7.3   6.4 6.9 ...
PMI manufacturing1 index 55.2 54.1   53.7 55.6 57.5   54.1 55.1 ...
Consumer confidence1,5 index -27.0 -25.0   -31.0 -33.0 -26.0   -28.0 -23.0 ...
Australia
[15.8%]
GDP1 qpc     3.4       3.1      
CPI apc     0.7       0.9      
Unemployment rate1 % 6.8 6.9   7.0 6.8 6.6   6.3 5.8 ...
Retail sales value apc 5.4 6.6   7.7 12.1 10.3   10.3 ... ...
House Prices7 apc     5.0       4.3      
PMI manufacturing1 index 49.3 46.7   56.3 52.1 55.3   55.3 58.8 ...
Consumer confidence8 index 79.5 93.8   105.0 107.7 112.0   107.0 109.1 111.8
China
[24.3%]
GDP apc     4.9       6.5      
Industrial production apc 5.6 6.9   6.9 7.0 7.3   35.1 35.1 ...
CPI apc 2.4 1.7   0.5 -0.5 0.2   -0.3 -0.2 ...
PMI manufacturing1 index 51.0 51.5   51.4 52.1 51.9   51.3 50.6 ...
South
Korea

[3.0%]
GDP1 qpc     2.1       1.2      
Industrial production1 mpc 0.7 3.1   -0.5 0.5 2.7   -1.6 ... ...
CPI apc 0.7 1.0   0.1 0.6 0.5   0.6 1.1 ...

(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