Weekly economic update

Weekly Economic Update - 25 June 2021

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Weekly Economic Update 25 June 2021#

Travel bubble with NSW paused…#

The quarantine-free travel arrangement between New Zealand and New South Wales was paused for 72 hours initially from midnight on Tuesday night as the COVID cluster in New South Wales continues to grow. At the same time, quarantine free travel with Victoria resumed.

…and COVID-19-positive case visits Wellington#

It was announced on Wednesday that a person travelled from Sydney to Wellington over the weekend and visited a number of locations in Wellington while likely infectious.

As a precaution, the Wellington region moved to Alert Level 2 from 6pm on Wednesday to midnight on Sunday night. The rest of the country remains at Alert Level 1. At the time of writing, contact tracing has not identified any instances of community transmission amongst the visitor's close contacts.

Based on the observed economic impacts from prior lockdowns, Treasury modelling suggests that likely economic impact of the Wellington region being in Alert Level 2 while the rest of the country remains at Alert Level 1 is something in the region of $10 million per week lost GDP (around 0.2% of GDP). The shorter the amount of time spent at this higher alert level, the more likely it is that some of this lost activity will be able to be made up.

Consumer confidence improves…#

Consumer confidence rose 1.9 points to 107.1 in the June release of the Westpac McDermott Miller Consumer Confidence Survey, though it remains slightly below its long run average (Figure 1).

Figure 1: Consumer confidence

Figure 1: Consumer confidence

Source: Westpac McDermott Miller

Increasing numbers of households have reported that their financial position has improved over the past 12 months, supported by a strengthening labour market and continued gains in house prices. This has been reflected in a significant rise in household spending, particularly on dining out and other entertainment activities. However, willingness to spend on durables was weaker, possibly reflecting concerns about the availability of many goods as a result of global supply chain disruptions.

…although results differ across age groups#

Households are more optimistic about the outlook for the economy and their own financial situation over the coming year. However, there are still some big differences across age groups. Confidence among those aged 30 and over is now back around average levels, while those aged 18 to 29 are still very pessimistic, likely owing to ongoing travel restrictions and the long-term trajectory of the economy, particularly the housing market.

Regional activity indicators continue trend#

All fourteen regions monitored in the Regional Activity Indices (RAIs) showed very large upward spikes relative to May last year when the country was in national lockdown (see page 4 and 5).

This continues the pattern of the last three months in showing abnormally high levels of activity growth compared to the same month the previous year and is a symptom of the annual percentage change methodology used to construct the indices. It does however underline the strength and breadth of the recovery a year on.

We expect the RAIs to return to more meaningful levels from next month's update onwards, as the effect of lockdown on the calculation passes.

Growth in advanced economies is stabilising…#

Purchasing Managers' Indices for June show that while the economic recovery remains strong in most advanced economies, the pace of growth appears to be stabilising (Figure 2). In the US, where the composite output index had risen well above the historical average, a fall was recorded in June as the services component eased from its record high in May.

The UK index eased slightly but remained firmly expansionary, indicating an ongoing recovery. A rise in COVID-19 cases driven by the highly infectious delta variant of the virus has delayed the anticipated easing in gathering restrictions to 19 July, so growth may remain flat next month.

The composite index for the euro area rose to a record high in June, led by the services component, indicating an accelerating economic recovery as restrictions are eased. Annual consumer price inflation in the euro area picked up to 2.0% in May, the highest rate since 2018, and consumer confidence lifted to a 3-year high. Rising input and output prices in the PMI survey suggest that inflation is set to continue rising in June.

Figure 2: Composite output PMI

Figure 2: Composite output PMI

Source: Haver

Australia's composite output PMI eased again in June but remained firmly expansionary, suggesting that strong growth will continue in the June quarter but may begin to slow as the economy nears a full recovery (Figure 2). In Japan, the PMI index fell further into contractionary territory, as state of emergency measures remained in place throughout most of June. Japan's consumer price inflation remained subdued in May, picking up slightly to -0.1% but staying below zero for the eighth consecutive month.

…as retail spending remains strong…#

Retail spending values rose 0.1% in Australia in May, remaining well above their pre-pandemic trend (Figure 3). Spending eased slightly in the UK, down 0.8% in May, but values were still in line with pre-pandemic trend growth.

Figure 3: Retail sales values

Figure 3: Retail sales values

Source: Haver

…and central bankers reassure markets#

US Federal Reserve Chair Jerome Powell reiterated his view that the sharp rise in consumer price inflation will prove transitory, noting that a return to the double-digit inflation seen in the 1970s is “very, very unlikely”. His comments were followed by a recovery in stock markets, which dipped on Friday after some members of the Federal Open Market Committee indicated the possibility of interest rate hikes as early as next year. Meanwhile, European Central Bank President Christine Lagarde played down the likelihood of US inflation spreading, stating that any spill-over effect on euro area inflation is expected to be moderate.

Vaccine shortages threaten global recovery#

While the US and UK have fully vaccinated close to half of their populations, poorer countries are lagging far behind, and vaccine shortages are set to make the disparity even worse. According to the World Health Organisation, of the 80 low-income countries receiving vaccines through its Covax programme, at least half have run out of vaccine supplies. These countries will be vulnerable to ongoing outbreaks of COVID-19, so it is likely that the economic recovery in the developing world will be much slower than in advanced economies.

Date Key NZ Data Previous (apc)
30 Jun ANZ Business Confidence -0.4 (net %)
2 July ANZ Consumer Confidence 114.0 (index)

High-Frequency Indicators#

Traffic and Freight Movement#

Traffic and Freight Movement

Source: Waka Kotahi NZ Transport Agency

Border Crossings#

Border Crossings

Source: Stats NZ

People Movements at Selected Locations#

People Movements at Selected Locations

Source: Google

Jobseeker (JS) and Income Support Recipients#

Jobseeker (JS) and Income Support Recipients

Source: MSD

COVID-19 Cases#

COVID-19 Cases

Source: World Health Organisation/Haver

World Commodity Prices#

World Commodity Prices

Source: ASB

Regional Activity Indicators#

Northland#

Northland

Auckland#

Auckland

Waikato#

Waikato

Bay of Plenty#

Bay of Plenty

Gisborne#

Gisborne

Hawke's Bay#

Hawke's Bay

Taranaki#

Taranaki

Manawatu-Whanganui#

Manawatu-Whanganui

Wellington#

Wellington

Tasman/Nelson/Marlborough#

Tasman/Nelson/Marlborough

Canterbury#

Canterbury

West Coast#

West Coast

Otago#

Otago

Southland#

Southland

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   2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1
Real Production GDP1 qpc 0.2 -1.5 -10.8 14.1 -1.0 1.6
  aapc 2.4 1.7 -1.6 -2.2 -2.9 -2.3
Current account balance (annual) %GDP -3.3 -2.8 -1.8 -0.8 -0.8 -2.2
Merchandise terms of trade apc 7.1 5.4 6.3 -0.3 -1.6 -0.9
CPI  inflation qpc 0.5 0.8 -0.5 0.7 0.5 0.8
  apc 1.9 2.5 1.5 1.4 1.4 1.5
Employment (HLFS)1 qpc 0.3 1.0 -0.2 -0.7 0.6 0.5
Unemployment rate1 % 4.1 4.3 4.0 5.2 4.9 4.7
Participation rate1 % 70.4 70.7 69.9 70.2 70.2 70.4
LCI salary & wage rates - total2 apc 2.6 2.5 2.1 1.8 1.6 1.6
QES average hourly earnings - total2 apc 3.4 4.4 3.5 4.1 3.9 2.6
Core retail sales volume apc 3.3 4.0 -11.7 7.6 4.2 5.5
Total retail sales volume apc 3.3 2.3 -14.2 8.1 4.6 6.8
WMM - consumer confidence3 Index 109.9 104.2 97.2 95.1 106.0 105.2
QSBO - general business situation1,4 net% -30.4 -68.4 -57.4 -37.7 -15.7 -10.7
QSBO - own activity outlook1,4 net% 2.5 -12.2 -23.5 -0.5 9.1 7.8
Monthly Indicators   Jan 21 Feb 21 Mar 21 Apr 21 May 21 Jun 21
Merchandise trade balance (12 month total) NZ$m 2,731 2,383 1,696 733 ... ...
Dwelling consents - residential apc 18.0 -4.7 44.7 83.7 ... ...
House sales - dwellings apc 6.9 19.8 37.0 436.6 81.4 ...
REINZ - house price index apc 18.9 21.3 23.9 26.8 30.0 ...
Estimated net migration (12 month total) people 29,683 14,964 5,401 6,328 ... ...
ANZ NZ commodity price index apc -1.6 0.1 4.0 6.9 7.9 ...
ANZ world commodity price index apc 5.2 11.0 20.2 24.4 24.4 ...
ANZBO - business confidence net% ... 7.0 -4.1 -2.0 1.8 -0.4
ANZBO - activity outlook net% ... 21.3 16.6 22.2 27.1 29.1
ANZ-Roy Morgan - consumer confidence net% 113.8 113.1 110.8 115.4 114.0 ...
Weekly Benefit Numbers   14 May 21 May 28 May 4 Jun 11 Jun 18 Jun
Jobseeker Support number 194,937 193,980 193,383 192,501 190,953 190,614
Work Ready number 116,205 115,173 114,354 113,484 112,047 111,510
Health Condition and Disability number 78,732 78,807 79,026 79,020 78,906 79,107
COVID-19 Income Relief Payment number ... ... ... ... ... ...
Full-time number ... ... ... ... ... ...
Part-time number ... ... ... ... ... ...
Daily Indicators   Wed
16/6/21
Thu
17/6/21
Fri
18/6/21
Mon
21/6/21
Tue
22/6/21
Wed
23/6/21
NZ exchange and interest rates5              
NZD/USD $ 0.7134 0.7096 0.7005 0.6952 0.6977 0.6998
NZD/AUD $ 0.9275 0.9295 0.9273 0.9268 0.9275 0.9280
Trade weighted index (TWI) index 74.3 74.2 73.6 73.3 73.5 73.7
Official cash rate (OCR) % 0.25 0.25 0.25 0.25 0.25 0.25
90 day bank bill rate % 0.32 0.33 0.33 0.33 0.34 0.34
10 year govt bond rate % 1.65 1.78 1.75 1.75 1.80 1.82
Share markets6              
Dow Jones index 34,034 33,823 33,290 33,877 33,946 33,874
S&P 500 index 4,224 4,222 4,166 4,225 4,246 4,242
VIX volatility index index 18.2 17.8 20.6 17.9 16.6 16.3
AU all ords index 7,633 7,601 7,624 7,485 7,593 7,552
NZX 50 index 12,582 12,541 12,552 12,499 12,535 12,586
US interest rates              
3 month OIS % 0.06 0.10 0.10 0.10 0.10 ...
3 month Libor % 0.12 0.13 0.13 0.14 0.13 ...
10 year govt bond rate % 1.57 1.52 1.45 1.50 1.48 1.50
Commodity prices6              
WTI oil US$/barrel 72.15 71.04 71.64 73.64 73.15 73.08
Gold US$/ounce 1,861 1,778.70 1,773.10 1,775.05 1,775.05 1,791.60
CRB Futures index 559 554.54 554.47 554.56 553.43 ...

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   Nov 20 Dec 20 2020Q4 Jan 21 Feb 21 Mar 21 2021Q1 Apr 21 May 21 Jun 21
United
States

[9.6%
share of
total goods
exports]
GDP1 qpc     1.1       1.6      
Industrial production1 mpc 0.5 1.2   1.1 -2.9 2.6   0.1 0.8 ...
CPI apc 1.2 1.4   1.4 1.7 2.6   4.2 5.0 ...
Unemployment rate1 % 6.7 6.7   6.3 6.2 6.0   6.1 5.8 ...
Employment change1 000s 264.0 -306.0   233.0 536.0 785.0   278.0 559.0 ...
Retail sales value apc 3.8 2.3   9.4 6.5 29.7   53.4 28.1 ...
House prices2 apc 9.2 10.1   11.1 12.0 13.3   ... ... ...
PMI manufacturing1 index 57.7 60.5   58.7 60.8 64.7   60.7 61.2 ...
Consumer confidence1,3 index 92.9 87.1   87.1 95.2 114.9   117.5 117.2 ...
Japan
[6.1%]
GDP1 qpc     2.8       -1.0      
Industrial production1 mpc 0.7 -0.2   3.1 -1.3 1.7   2.9 ... ...
CPI apc -0.9 -1.1   -0.6 -0.4 -0.2   -0.4 -0.1 ...
Unemployment rate1 % 3.0 3.0   2.9 2.9 2.6   2.8 ... ...
Retail sales value apc 0.6 5.0   2.7 3.7 5.2   11.9 ... ...
PMI manufacturing1 index 49.0 50.0   49.8 51.4 52.7   53.6 53.0 ...
Consumer confidence1,4 index 33.6 31.8   30.0 33.7 36.1   34.8 34.2 ...
Euro area
[5.5%]
GDP1 qpc     -0.6       -0.3      
Industrial production1 mpc 2.1 0.1   0.9 -1.2 0.4   0.8 ... ...
CPI apc -0.3 -0.3   0.9 0.9 1.3   1.6 2.0 ...
Unemployment rate1 % 8.3 8.2   8.2 8.2 8.1   8.0 ... ...
Retail sales volume apc -1.5 1.3   -4.8 -1.4 13.1   23.9 ... ...
PMI manufacturing1 index 53.8 55.2   54.8 57.9 62.5   62.9 63.1 ...
Consumer confidence5 index -17.6 -13.8   -15.5 -14.8 -10.8   -8.1 -5.1 -3.3
United
Kingdom

[2.7%]
GDP1 qpc     1.3       -1.5      
Industrial production1 mpc 0.8 0.0   -1.9 1.1 1.7   -1.3 ... ...
CPI apc 0.4 ...   ... ... ...   ... ... ...
Unemployment rate1 % 5.0 5.1   5.0 4.9 4.8   4.7 ... ...
Retail sales volume apc 2.2 3.1   -5.7 -3.6 7.1   42.5 24.6 ...
House prices6 apc 6.5 7.3   6.4 6.9 5.7   7.1 10.9 ...
PMI manufacturing1 index 55.6 57.5   54.1 55.1 58.9   60.9 65.6 ...
Consumer confidence1,5 index -33.0 -26.0   -28.0 -23.0 -16.0   -15.0 -9.0 ...
Australia
[15.8%]
GDP1 qpc     3.2       1.8      
CPI apc     0.9       1.1      
Unemployment rate1 % 6.8 6.6   6.4 5.9 5.7   5.5 5.1 ...
Retail sales value apc 12.1 10.3   10.3 5.2 3.9   23.8 ... ...
House Prices7 apc     4.3       8.9      
PMI manufacturing1 index 52.1 55.3   55.3 58.8 59.9   61.7 61.8 ...
Consumer confidence8 index 107.7 112.0   107.0 109.1 111.8   118.8 113.1 107.2
China
[24.3%]
GDP apc     6.5       18.3      
Industrial production apc 7.0 7.3   35.1 35.1 14.1   9.8 8.8 ...
CPI apc -0.5 0.2   -0.3 -0.2 0.4   0.9 1.3 ...
PMI manufacturing1 index 52.1 51.9   51.3 50.6 51.9   51.1 51.0 ...
South
Korea

[3.0%]
GDP1 qpc     1.1       1.7      
Industrial production1 mpc 0.5 2.7   -1.2 4.2 -0.9   -1.6 ... ...
CPI apc 0.6 0.5   0.6 1.1 1.5   2.3 2.6 ...

(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