Weekly Economic Update 26 March 2021
Community case linked to MIQ facility
A new community case of a Managed Isolation and Quarantine (MIQ) worker in Auckland reported on Monday has been epidemiologically linked to a case in the MIQ facility. The worker is self-isolating, and no additional cases have been recorded.
Consumer confidence slips…
Consumer confidence fell by 0.8 points to 105.2 in the March quarter release of the Westpac McDermott Miller Consumer Confidence Survey (Figure 1). Confidence remains below long-run average levels, consistent with other measures of consumer confidence.
Figure 1: Consumer Confidence
Source: Westpac McDermott Miller
While households are feeling more confident about their personal financial situation, they are concerned about the economy's long-run trajectory. The survey also showed a big difference in confidence levels across age groups, with younger New Zealanders (those aged 18 to 29), more concerned about their financial situation. According to Westpac, one big factor that's likely to have influenced this split in confidence across age groups is the high level of house price growth.
…and new housing policies announced
New housing policies were announced by the government this week, including the end of tax- deductible interest on investment properties, the extension of the bright-line test from 5 to 10 years, and the establishment of a Housing Acceleration Fund committed to infrastructure investment.
These polices are intended to make inroads towards addressing housing affordability by reducing investor demand for housing, thus freeing up more stock for owner occupiers, and by increasing the supply of new housing.
The annual trade surplus declines further…
The seasonally adjusted monthly trade deficit narrowed from a deficit of $673 million in January to $224 million in February as export values increased and imports fell. The annual trade surplus continued to decline from November's record high, falling to $2.4 billion. Consumption and capital goods imports were both up on an annual basis after recovering at the end of 2020 (Figure 2).
Figure 2: Imports by Broad Economic Category
Source: Stats NZ
On a seasonally adjusted monthly basis, goods exports rose 1.1% in February, following two months of decreases, though values remain well below year-ago levels. Log exports fell while meat and fruit exports recovered from dips in January, and dairy products were flat. Monthly goods imports fell 7.5% after two months of increases, to be only slightly down compared to February 2020.
Growth in imports is expected to be subdued going forward, now that values are close to pre-pandemic levels. Export values will likely see more robust growth in coming months, driven by the recent strengthening in commodity prices. The annual trade balance is expected to continue declining over 2021 as last year's weakness in imports falls out of the annual balance.
Global recovery appears steady in March…
Purchasing Managers Index (PMI) readings for advanced economies show an ongoing recovery in March, with most headline indices now in expansionary territory (Figure 3). Readings for the United Kingdom (UK) and euro area both rose sharply, though the return of COVID-19 restrictions in Europe will likely result in a fall in the euro area index next month. Australia and the United States (US) remain at high levels, with virus containment in Australia and the successful vaccination programme combined with fiscal stimulus in the US helping them to outperform. Japan's index remains contractionary, with the country's state of emergency being lifted just this week.
Figure 3: Composite Output PMI
…but UK unemployment fall hides weakness
Despite the renewed national lockdown in January, the UK unemployment rate fell to 5.0% from 5.1% in December. This was not due to an improvement in the labour market, however, as employment numbers dropped by 147,000. The drop in the unemployment rate was instead driven by a reduction in the labour force participation rate as fewer people actively looked for jobs, likely as a result of the renewed COVID-19 restrictions.
Central banks maintain policy support…
Central banks in the UK, Japan and Thailand all maintained their low policy rates this week, and the European Central Bank increased the pace of its bond-buying programme to counter the recent sell-off in debt markets. In the US, Federal Reserve Board Governor Brainard reiterated a commitment to maintain support, noting a focus on "outcomes rather than outlook". Meanwhile, central banks in Turkey, Brazil and Russia increased policy rates amid concerns over rising inflation.
…as inflation remains subdued
Annual consumer price inflation in the UK and Japan remained subdued in February, with the annual rate falling to 0.7% in the UK and rising to 0.4% in Japan (Figure 4).
Figure 4: Consumer price inflation
Euro area consumer confidence jumps…
Consumer confidence in the euro area increased sharply in March, despite expectations of a fall as restrictions were tightened in several countries. The index rose to −10.8, the highest level since February 2020 but still well short of pre-pandemic levels. With virus cases continuing to rise, the recovery in consumer confidence is unlikely to be sustained over the coming months.
...despite new infections rising…
Mobility restrictions have been reinstated in France, Germany and Italy amid a surge in cases of a more transmissible strain of COVID-19. Restrictions are not as tight as during previous lockdowns, suggesting that they may be in place for longer as the countries work to vaccinate their populations.
…and vaccine distribution failing to keep pace
Difficulties with securing and distributing vaccines continue in Europe, with the European Union (EU) now taking a tougher stance on the exporting of EU-made vaccines. Securing vaccines is only part of the problem, however, given that nearly a fifth of delivered vaccines in the EU have not been used and a growing percentage of Europeans consider the AstraZeneca vaccine to be unsafe.
|Date||Key upcoming NZ Data||Previous|
|30 Mar||Building consents issued||+2.1% (qpc)|
|31 Mar||ANZ Business Confidence||0.0% (net)|
|1 Apr||ANZ Consumer Confidence||113.1 (index)|
High-Frequency Indicators (Domestic)
Source: Waka Kotahi NZ Transport Agency
Source: Waka Kotahi NZ Transport Agency
Spending by Region
Source: Marketview data via MBIE
Spending by Industry
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||13.9||-1.0|
|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|
|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||3,287||2,984||2,733||2,364|
|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||12 Feb||19 Feb||26 Feb||5 Mar||12 Mar||19 Mar|
|Health Condition and Disability||number||78,171||78,339||78,219||78,126||78,174||78,243|
|COVID-19 Income Relief Payment||number||...||...||...||...||...||...|
|NZ exchange and interest rates5|
|Trade weighted index (TWI)||index||75.3||75.6||75.0||75.0||74.5||73.6|
|Official cash rate (OCR)||%||0.25||0.25||0.25||0.25||0.25||0.25|
|90 day bank bill rate||%||0.33||0.34||0.34||0.35||0.34||0.34|
|10 year govt bond rate||%||1.73||1.79||1.84||1.82||1.71||1.57|
|VIX volatility index||index||19.2||21.6||21.0||18.9||20.3||21.2|
|AU all ords||index||7,048||7,004||6,960||6,995||6,987||7,014|
|US interest rates|
|3 month OIS||%||0.07||0.07||0.07||0.07||0.07||...|
|3 month Libor||%||0.19||0.19||0.20||0.19||0.20||...|
|10 year govt bond rate||%||1.63||1.71||1.74||1.69||1.63||1.62|
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|
|Retail sales value||apc||3.6||6.1||5.4||3.8||2.3||9.5||6.3||...|
|Retail sales value||apc||-1.9||-8.7||6.4||0.6||5.0||2.7||...||...|
|Retail sales volume||apc||4.5||2.5||4.4||-1.9||0.9||-6.4||...||...|
|Retail sales volume||apc||2.7||4.5||6.0||2.3||3.1||-5.9||...||...|
|Retail sales value||apc||5.4||6.6||7.7||12.1||10.3||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