Weekly Economic Update 20 November 2020
Masks are now mandatory on all domestic flights and Auckland public transport as contact tracing continues. Industry performance indexes show services demand remains firm, but indicate challenges developing on the supply side.
Further positive vaccine news is helping alleviate medium-term risks to the global economic outlook, but near-term risks are rising as more US states tighten restrictions. China continued to grow steadily in October, but activity remains well below pre-pandemic levels in some other Asian economies.
Masks become mandatory on some transport
Cabinet has agreed to make masks mandatory on all domestic flights and on Auckland public transport. More than 20,000 COVID-19 tests have been taken in Auckland since the new community case was reported on 12 November, with only one positive result coming from a close contact.
Figure 1: Daily COVID-19 cases by infection source
Source: Institute of Environmental Science and Research
Wellbeing holds up
September quarter wellbeing statistics from Stats NZ show that while most Kiwis are still doing well, some are struggling. For people in employment, the percentage who reported having enough or more than enough money to meet their needs was 73%, compared to 35% for the unemployed. For those who wanted a job but were not classified as unemployed since they were not actively seeking a job (potential labour force), this number was 45%.
On overall life satisfaction, employed people gave a mean rating of 7.9 out of 10 compared to 7.3 for the potential labour force and 7.0 for the unemployed. Since March, the number of unemployed people has increased by 31,000 and the number in the potential labour force has increased by 10,000. For New Zealand overall, life satisfaction remains high with 84% of people giving a rating of 7 or higher. Since June, average satisfaction fell slightly from 7.9 to 7.8.
Activity indicators point to expansion
The BNZ-BusinessNZ indexes remained above 50 in October, indicating that activity in the manufacturing and services sectors is generally expanding. The Performance of Manufacturing Index (PMI) fell 2.3 points, to 51.7, led by falls in production and new orders (Figure 2).
The Performance of Services Index (PSI) rose 1.0 point to 51.4. Growth in inventories was up 7.5 points and new orders rose 2.9 points, although sales fell 2.5 points. According to BNZ, demand indicators remain firm but there are challenges on the supply side and we have not yet experienced the full effect from the lack of tourism.
Figure 2: BNZ-BusinessNZ Performance Indexes
Dairy prices reverse previous drop
Prices lifted at the GlobalDairyTrade auction on Wednesday, with both whole milk powder and overall prices increasing by 1.8%. This reversed the fall at the previous auction, leaving overall prices around 9% down on the same time last year.
More positive vaccine news…
Further positive news around a COVID-19 vaccine, this time from Moderna, is helping alleviate medium-term risks to the economic outlook. Moderna reported its vaccine had been found to be 95% effective and that it expects to file for emergency use in the US in coming weeks. However, rising infections and tighter restrictions, especially in the US over the past week, are increasing the risks of a near-term contraction in activity. In Western Europe, social distancing restrictions appear to be successfully stemming growth in new cases.
…as the recovery in China continues…
Meanwhile, China’s economy continued to grow steadily in October led by industrial production and fixed asset investment, up 6.9% on a year ago and 1.8% year-to-date respectively. The base of the recovery appears to be broadening, with retail sales rising at its fastest pace this year and a notable pickup in the services sector. However, renewed restrictions in Europe and the US add uncertainty to external demand outlook.
…but remains incomplete elsewhere…
Elsewhere in Asia, September quarter GDP (3Q GDP) results for Japan, Malaysia and Thailand show the recovery is incomplete (Fig 3). Japan’s GDP was 5.0% higher than in the June quarter (2Q), but 4.2% below its pre-pandemic level and 5.9% below its 3Q 2019 level, just before the consumption tax rise. Rising virus case numbers are skewing the risks towards weaker growth in the near term.
Figure 3: Real GDP in Japan, Thailand and Malaysia
In Malaysia, GDP rebounded 18.2% from the Q2, to be 3.3% below pre-virus levels. However, momentum has slowed, and social distancing restrictions have been tightened and extended to more regions. In Thailand, 3Q GDP rose 6.5% from Q2, but remained 6.4% below pre-pandemic levels, chiefly owing to negligible international tourism, which is likely to remain weak for some months.
Australian employment continues to recover
Employment increased 1.4% (179,000) between September and October, and hours worked rose 1.2%, the latter led by large gains in Victoria as health restrictions were eased (Fig 4). The increase in employment means the level in October is 1.7% (230,000) below the March level. Labour force participation was up 0.9 percentage points to 65.8%, just below March’s rate of 65.9%, and the unemployment rate ticked up to 7.0% from 6.9% in September.
Figure 4: Australian labour market
Growth in the Wage Price Index slowed to 0.1% in the September quarter and 1.4% on a year ago, both record-low growth rates. Delays in remuneration reviews due to the pandemic and staggered implementation of minimum wage rises partly accounted for the weakness. Wage growth is likely to remain subdued while the unemployment rate remains elevated.
|Date||Key upcoming NZ data||Previous|
|20 Nov||National Accounts updates for year ended March 2020|
|23 Nov||Retail Trade Survey, Sept qtr, volumes||-14.6%|
High-Frequency Indicators (Domestic)
Source: Waka Kotahi NZ Transport Agency
Source: Waka Kotahi NZ Transport Agency
Source: Electricity Authority
Source: Paymark and Verifone data via Data Ventures
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||0.1||0.7||0.5||-1.4||-12.2||...|
|Current account balance (annual)||%GDP||-3.8||-3.8||-3.4||-2.9||-1.9||...|
|Merchandise terms of trade||apc||-1.0||0.9||7.1||5.4||6.5||...|
|LCI salary & wage rates - total2||apc||2.1||2.5||2.6||2.5||2.1||1.8|
|QES average hourly earnings - total2||apc||4.4||4.2||3.6||3.6||3.0||3.6|
|Core retail sales volume||apc||3.6||5.4||3.3||4.0||-11.7||...|
|Total retail sales volume||apc||2.9||4.5||3.3||2.3||-14.2||...|
|WMM - consumer confidence3||Index||103.5||103.1||109.9||104.2||97.2||...|
|QSBO - general business situation1,4||net%||-30.3||-38.7||-28.7||-67.7||-58.3||-39.4|
|QSBO - own activity outlook1,4||net%||-1.9||-0.7||3.7||-13.1||-24.6||0.4|
|Monthly Indicators||May 20||Jun 20||Jul 20||Aug 20||Sep 20||Oct 20|
|Merchandise trade balance (12 month total)||NZ$m||-1,274||-1,131||57||1,417||1,710||...|
|Dwelling consents - residential||apc||-4.4||20.4||-0.8||-3.6||7.7||...|
|House sales - dwellings||apc||-44.3||11.8||29.1||27.7||41.0||25.0|
|REINZ - house price index||apc||7.0||7.7||9.2||9.6||10.9||13.5|
|Estimated net migration (12 month total)||people||90,694||88,146||81,370||75,117||67,735||...|
|ANZ NZ commodity price index||apc||-1.3||-2.9||0.2||-3.9||-6.4||-5.6|
|ANZ world commodity price index||apc||-8.1||-5.7||-1.5||-2.8||-3.0||-2.3|
|ANZBO - business confidence||net%||-41.8||-34.4||-31.8||-41.8||-28.5||-15.7|
|ANZBO - activity outlook||net%||-38.7||-25.9||-8.9||-17.5||-5.4||4.7|
|ANZ-Roy Morgan - consumer confidence||net%||97.3||104.5||104.3||100.2||100.0||108.7|
|Weekly Benefit Numbers||9 Oct||16 Oct||23 Oct||30 Oct||6 Nov||13 Nov|
|Health Condition and Disability||number||71,600||72,167||72,774||73,306||74,362||74,806|
|COVID-19 Income Relief Payment||number||11,054||10,517||8,733||8,995||8,168||7,398|
|NZ exchange and interest rates5|
|Trade weighted index (TWI)||index||72.6||73.5||72.9||73.1||73.3||73.0|
|Official cash rate (OCR)||%||0.25||0.25||0.25||0.25||0.25||0.25|
|90 day bank bill rate||%||0.28||0.28||0.27||0.26||0.25||0.25|
|10 year govt bond rate||%||0.76||0.84||0.84||0.83||0.88||0.89|
|VIX volatility index||index||23.5||25.4||23.1||22.5||22.7||23.8|
|AU all ords||index||6,651||6,619||6,609||6,687||6,698||6,726|
|US interest rates|
|3 month OIS||%||0.09||0.09||0.09||0.09||0.09||...|
|3 month Libor||%||0.22||0.22||0.22||0.22||0.23||...|
|10 year govt bond rate||%||...||0.88||0.89||0.91||0.87||0.88|
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||Apr 20||May 20||Jun 20||2020Q2||Jul 20||Aug 20||Sep 20||2020Q3||Oct 20||Nov 20|
|Retail sales value||apc||-19.9||-5.6||2.2||2.7||3.6||5.9||5.7||...|
|Retail sales value||apc||-13.9||-12.5||-1.3||-2.9||-1.9||-8.7||...||...|
|Retail sales volume||apc||-19.3||-2.7||1.5||0.1||4.4||2.2||...||...|
|Retail sales volume||apc||-22.9||-13.0||-2.0||1.2||2.6||4.6||...||...|
|Retail sales value||apc||-8.9||5.5||8.6||12.8||5.4||6.6||...||...|
(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