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Weekly economic update

Weekly Economic Update - 30 October 2020

Weekly Economic Update 30 October 2020

No new COVID-19 cases have been reported in the community, although cases continue to be recorded in Managed Isolation and Quarantine facilities. Inflation came in slightly weaker than expected in the September quarter, while the annual trade surplus continued to grow. Jobs numbers increased in the September month (supported by hiring of voting support workers) and the improvement in business confidence seen in the October preliminary ANZ Business Outlook was confirmed in the final results.

Internationally, September quarter GDP data rebounded substantially in the US, South Korea and Singapore, but remained below pre-pandemic levels. Meanwhile, surging new COVID-19 cases across Europe and the US and the imposition of fresh restrictions on activity in some states and countries is likely to slow, or even reverse, the pace of the recovery.

No cases of community transmission this week

There have been no further cases of community transmission after a port worker and two workplace contacts tested positive for COVID-19 last week (Figure 1). More than 20,000 community tests have been conducted in Auckland since the new community case was reported on 18 October.

Figure 1: Daily COVID-19 cases by source

Figure 1: Daily COVID-19 cases by source

Source: Institute of Environmental Science and Research

People movements mostly return to normal

Mobility reports from Google suggest that people movements around NZ have mostly returned to levels seen in January (Figure 2). In the week to 23 October, movements at workplaces, grocery and retail stores, which fell during higher Alert Levels, had recovered to their January 2020 average. Movements in residential areas, which increased by 30% during Alert Level 4, were only slightly above the January average. The locations where mobility remained low were parks, possibly due to seasonal trends and transit stations, which reflects the low public transport usage seen in other data.

Figure 2: People movements at selected locations

Figure 2: People movements at selected locations

Source: Google

Income support continues to reduce

In the week to 23 October, the number of COVID‑19 Income Relief Payment (CIRP) recipients fell by 1,784 as Jobseeker Support fell by 395, bringing the total number of recipients to 212,500. Data from the Ministry of Social Development suggest that most people whose CIRP payments have ended are not transferring onto Jobseeker Support (Figure 3), likely due to stricter eligibility requirements for Jobseeker Support.

Figure 3: Weekly CIRP cancels and JS transfers

Figure 3: Weekly CIRP cancels and JS transfers

Source: Ministry of Social Development

CPI inflation below market expectation…

Annual CPI inflation eased to 1.4% in the September quarter, from 1.5% in the June quarter, weaker than most market expectations but broadly in line with our latest forecasts. Quarterly inflation was 0.7%, driven by broad-based increases in both the tradables and non-tradables groups. Inflationary pressures are likely to continue to ease in coming months as the effects of the pandemic flow through the economy. Combined with continuing border restrictions and weaker population growth, domestic demand is likely to remain lower than a year ago, limiting the rate at which prices can increase.

… the annual trade surplus widens further…

Compared to the same month a year ago, export values were down 8.0% and imports were down 11.4%. This resulted in September’s trade deficit narrowing to $1.0 billion from $1.3 billion a year ago, and the trade surplus over the 12 months to September widening to $1.7 billion from $1.4 billion in the 12 months to August. This compares with a trade deficit of $5.3 billion in the 12 months ending September 2019 (Figure 4). 

Figure 4: Overseas merchandise trade

Figure 4: Overseas merchandise trade

Source: Stats NZ

..with one-off items impacting exports

In the three months ended September, seasonally adjusted export values were 0.7% higher than in the previous three-month period, and import values were 3.3% higher. One-off exports of aircraft into long-term storage in August accounted for much of the quarterly increase in seasonally adjusted export values. Notable movements among the major export commodities in the quarter included: dairy exports down 16.1% ($681 million) driven by lower prices, while log and meat exports rose 20.8% ($207 million) and 4.8% ($92 million) respectively, as higher volumes more than offset lower prices for both commodities.

On the import side, most import types rose in the quarter as they recovered from pandemic induced disruption in the prior quarter, although imports of crude oil remained at low levels. Imports of machinery and plant, and passenger motor cars led the recovery, the former returned to a level that is line with the 3-year average, but the latter was down about 30% on the 3-year average.

Import values are expected to rise further, as the domestic recovery strengthens while export values are expected to ease, reflecting lower commodity prices in recent months. As a result, the annual trade surplus is expected to narrow.

Filled job numbers rise…

Filled job numbers rose by 7,266 to 2.2 million in the month of September, following a similar rise in August. The increase for September is mostly driven by an increase in filled jobs in public administration and safety and is partly related to hiring for voting support workers. Stats NZ calculates filled jobs by averaging weekly jobs paid throughout the month, based on tax data.

…and business confidence improved further

In the final read of the ANZ Business Outlook survey for October, business confidence and activity indicators confirmed their improvement. Business confidence rose 13 points to a net 16% of firms expecting conditions to deteriorate, while own activity lifted 10 points to a net 5% expecting an improvement in their own activity. Goods producing sectors continue to be more optimistic than other sectors. Investment intentions remain subdued but employment intentions lifted further, up 9 points to a net 3% of firms intending to reduce employment.

Figure 5: ANZ Business Outlook

Figure 5: ANZ Business Outlook

Source: ANZ

September quarter growth rebounds…

Internationally, reports on the scale of the rebound in September quarter GDP (Q3 GDP) continue to flow in. However, surging new COVID-19 cases across Europe and the US and the imposition of fresh restrictions on activity in some states and countries is likely to slow, or even reverse, the recovery that has been underway since mid-year.

In the US, Q3 GDP was 7.4% (33.1% annualised) higher than in the previous quarter, which recorded a 9.0% decline, but 2.9% lower than the same quarter a year ago, and 3.5% below pre-pandemic levels (Figure 6). Private consumption led the recovery, supported by government stimulus. Analysts expect December quarter GDP growth of about 0.7% as private consumption growth slows, with rising COVID-19 cases and the possibility of added restriction key downside risks.

Figure 6: GDP growth – US, South Korea, Singapore

Figure 6: GDP growth – US, South Korea, Singapore

Source: Haver

In South Korea, Q3 GDP rose 1.9% after falling 4.4% over the first six months of the year, to be 1.3% below year ago levels (Figure 6). Exports led the recovery, up 15.6% in the quarter, while private consumption dipped as a rise in COVID infections dragged on spending. Looking forward, the resurgence of infections among key trading partners is likely to moderate export growth.

In Singapore, Q3 GDP rose 7.9%, following a contraction of 13.2% in the June quarter, to be 7.0% lower than the same quarter a year ago (Figure 6). The services sector continues to struggle, particularly travel and consumer-facing services.

…but may not be sustained

In the euro area, ‘flash’ or early releases of October’s Purchasing Manager’s Indices (PMIs), echoed other signals of slowing growth. The composite services and manufacturing PMI slid into contractionary territory, down 0.6 points to 49.4, driven by weakness in the services component. Some analysts view the PMIs as confirmation that the euro area recovery has stalled. Analysts expect the Q3 GDP report, due overnight New Zealand time, to show growth of about 11% in the quarter.

Inflation remains subdued in Australia

In Australia, consumer prices were 1.6% higher in the September quarter than in the previous quarter, driven by a rebound in childcare prices, which the Federal Government had temporarily made free in the June quarter. This partly reversed the previous quarter’s 1.9% fall and, compared to the same quarter last year, prices were up 0.7%. Looking through the volatility, trimmed mean and weighted median measures of core inflation were stable at  1.2% and 1.3% respectively, well below the central bank’s 2-3% target band (Figure 7). 

Figure 7: Consumer price inflation – Australia

Figure 7: Australia – consumer price inflation

Source: Haver

Meanwhile, Victorian Premier Andrews confirmed an easing of Melbourne’s activity restrictions from midnight Tuesday 27 October. Travel restrictions within the state have also been removed. Further easing is flagged for Sunday. The recovery in Victoria will likely provide a boost to Australian growth in the December quarter.

Date Key NZ Data Previous (apc)
2 Nov Building consents issued + 0.3%
4 Nov Unemployment rate 4.0%
4 Nov ANZ Commodity Price Indexes - 0.2%
5 Nov ANZ Business Outlook - 15% (net)

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

Wage Subsidy (jobs supported)

Wage Subsidy (jobs supported)

Source: MSD

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   2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3
Real Production GDP1 qpc 0.1 0.7 0.5 -1.4 -12.2 ...
  aapc 2.8 2.7 2.3 1.5 -2.0 ...
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 ...
CPI  inflation qpc 0.6 0.7 0.5 0.8 -0.5 0.7
  apc 1.7 1.5 1.9 2.5 1.5 1.4
Employment (HLFS)1 qpc 0.6 0.4 0.3 1.1 -0.3 ...
Unemployment rate1 % 4.0 4.2 4.1 4.2 4.0 ...
Participation rate1 % 70.5 70.7 70.4 70.7 69.9 ...
LCI salary & wage rates - total2 apc 2.1 2.5 2.6 2.5 2.1 ...
QES average hourly earnings - total2 apc 4.4 4.2 3.6 3.6 3.0 ...
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   Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20
Merchandise trade balance (12 month total) NZ$m -2,393 -1,274 -1,131 57 1,417 1,710
Dwelling consents - residential apc -16.5 -4.4 20.4 -0.8 -3.6 ...
House sales - dwellings apc -77.2 -44.3 11.8 29.1 26.9 37.1
REINZ - house price index apc 8.6 7.0 7.6 9.2 9.9 11.1
Estimated net migration (12 month total) people 89,552 87,088 84,291 77,735 71,486 ...
ANZ NZ commodity price index apc 0.9 -1.3 -2.9 0.2 -3.9 -6.4
ANZ world commodity price index apc -9.2 -8.1 -5.7 -1.5 -2.8 -3.0
ANZBO - business confidence net% -66.6 -41.8 -34.4 -31.8 -41.8 -28.5
ANZBO - activity outlook net% -55.1 -38.7 -25.9 -8.9 -17.5 -5.4
ANZ-Roy Morgan - consumer confidence net% 84.8 97.3 104.5 104.3 100.2 100.0
Weekly Benefit Numbers   18 Sep 25 Sep 2 Oct 9 Oct 16 Oct 23 Oct
Jobseeker Support number 202,274 203,389 204,116 204,348 204,171 203,776
Work Ready number 131,509 132,368 132,836 132,748 132,004 131,002
Health Condition and Disability number 70,765 71,021 71,280 71,600 72,167 72,774
COVID-19 Income Relief Payment number 14,573 12,884 11,888 11,054 10,517 8,733
Full-time number 12,996 11,487 10,581 9,841 9,373 7,782
Part-time number 1,577 1,397 1,307 1,213 1,144 951
Daily Indicators   Wed
21/10/20
Thu
22/10/20
Fri
23/10/20
Mon
26/10/20
Tue
27/10/20
Wed
28/10/20
NZ exchange and interest rates5              
NZD/USD $ 0.6594 0.6645 0.6672 ... 0.6683 0.6698
NZD/AUD $ 0.9335 0.9352 0.9368 ... 0.9374 0.9400
Trade weighted index (TWI) index 71.0 71.3 71.7 ... 71.8 72.1
Official cash rate (OCR) % 0.25 0.25 0.25 0.25 0.25 0.25
90 day bank bill rate % 0.27 0.27 0.27 ... 0.27 0.27
10 year govt bond rate % 0.56 0.58 0.59 ... 0.57 0.55
Share markets6              
Dow Jones index 28,211 28,364 28,336 27,685 27,463 26,520
S&P 500 index 3,436 3,453 3,465 3,401 3,391 3,271
VIX volatility index index 28.7 28.1 27.6 32.5 33.4 40.3
AU all ords index 6,403 6,384 6,374 6,357 6,247 6,262
NZX 50 index 12,433 12,407 12,470 ... 12,252 12,265
US interest rates              
3 month OIS % 0.09 0.09 0.09 0.09 0.09 ...
3 month Libor % 0.21 0.21 0.22 0.22 0.21 ...
10 year govt bond rate % 0.83 0.87 0.85 0.81 0.79 0.79
Commodity prices6              
WTI oil US$/barrel 40.03 40.64 39.73 38.39 39.34 ...
Gold US$/ounce 1,924 1,900.95 1,903.65 1,898.45 1,905.70 ...
CRB Futures index 416 415.09 415.29 415.63 414.20 ...

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   2020Q1 Apr 20 May 20 Jun 20 2020Q2 Jul 20 Aug 20 Sep 20 2020Q3 Oct 20
United
States

[9.6%
share of
total goods
exports]
GDP1 qpc -1.3       -9.0       ...  
Industrial production1 mpc   -12.7 0.7 6.2   4.2 0.4 -0.6   ...
CPI apc   0.3 0.1 0.6   1.0 1.3 1.4   ...
Unemployment rate1 %   14.7 13.3 11.1   10.2 8.4 7.9   ...
Employment change1 000s   -20787.0 2725.0 4781.0   1761.0 1489.0 661.0   ...
Retail sales value apc   -19.9 -5.6 2.2   2.7 2.8 5.4   ...
House prices2 apc   3.8 3.6 3.5   4.1 5.2 ...   ...
PMI manufacturing1 index   41.5 43.1 52.6   54.2 56.0 55.4   ...
Consumer confidence1,3 index   85.7 85.9 98.3   91.7 86.3 101.3   100.9
Japan
[6.1%]
GDP1 qpc -0.6       -7.9       ...  
Industrial production1 mpc   -9.8 -8.9 1.9   8.7 1.0 ...   ...
CPI apc   0.2 0.0 0.1   0.4 0.1 0.0   ...
Unemployment rate1 %   2.6 2.9 2.8   2.9 3.0 ...   ...
Retail sales value apc   -13.9 -12.5 -1.3   -2.9 -1.9 ...   ...
PMI manufacturing1 index   41.9 38.4 40.1   45.2 47.2 47.7   ...
Consumer confidence1,4 index   21.3 24.1 28.5   29.5 29.3 32.8   ...
Euro area
[5.5%]
GDP1 qpc -3.7       -11.8       ...  
Industrial production1 mpc   -18.1 12.5 9.5   5.0 0.7 ...   ...
CPI apc   0.3 0.1 0.3   0.4 -0.2 -0.3   ...
Unemployment rate1 %   7.4 7.6 7.8   8.0 8.1 ...   ...
Retail sales volume apc   -19.3 -2.6 1.4   -0.1 3.7 ...   ...
PMI manufacturing1 index   33.4 39.4 47.4   51.8 51.7 53.7   ...
Consumer confidence5 index   -22.0 -18.8 -14.7   -15.0 -14.7 -13.9   -15.5
United
Kingdom

[2.7%]
GDP1 qpc -2.5       -19.8       ...  
Industrial production1 mpc   -19.5 5.6 9.9   5.2 0.3 ...   ...
CPI apc   0.8 0.6 0.6   1.1 0.2 ...   ...
Unemployment rate1 %   4.0 4.1 4.1   4.3 4.5 ...   ...
Retail sales volume apc   -22.9 -13.0 -2.0   1.2 2.6 4.6   ...
House prices6 apc   3.7 1.8 -0.1   1.5 3.7 5.0   ...
PMI manufacturing1 index   32.6 40.7 50.1   53.3 55.2 54.1   ...
Consumer confidence1,5 index   -22.7 -23.7 -21.0   -16.6 -16.6 -17.9   ...
Australia
[15.8%]
GDP1 qpc -0.3       -7.0       ...  
CPI apc 2.2       -0.3       0.7  
Unemployment rate1 %   6.4 7.1 7.4   7.5 6.8 6.9   ...
Retail sales value apc   -8.9 5.5 8.6   12.8 5.4 ...   ...
House Prices7 apc 8.1       6.6       ...  
PMI manufacturing1 index   35.8 41.6 51.5   53.5 49.3 46.7   ...
Consumer confidence8 index   75.6 88.1 93.7   87.9 79.5 93.8   105.0
China
[24.3%]
GDP apc -6.8       3.2       4.9  
Industrial production apc   3.9 4.4 4.8   4.8 5.6 6.9   ...
CPI apc   3.3 2.4 2.5   2.7 2.4 1.7   ...
PMI manufacturing1 index   50.8 50.6 50.9   51.1 51.0 51.5   ...
South
Korea

[3.0%]
GDP1 qpc -1.3       -3.2       1.9  
Industrial production1 mpc   -6.6 -7.0 7.1   1.9 -0.7 ...   ...
CPI apc   0.1 -0.3 -0.0   0.3 0.7 1.0   ...

(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

Last updated: 
Friday, 30 October 2020