Weekly economic update

Weekly Economic Update - 5 March 2021

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Weekly Economic Indicators 5 March 2021#

Alert levels increase in response to new cases#

Higher alert levels were reintroduced for seven days, beginning Sunday 28 February, following the emergence of more community cases in Auckland. Alert levels were raised to Level 3 in Auckland and Level 2 for the rest of New Zealand.

The terms of trade rose in December…#

The merchandise terms of trade rose by 1.3% in the December quarter, following a sharp fall of 4.7% in the September quarter, to be down 1.7% on the same period a year ago. Goods export prices fell by 0.4% in the quarter, driven by lower prices for dairy products while import prices were down 1.7%, on the back of lower petroleum and petroleum product prices (Figure 1).

Figure 1: Terms of trade

Figure 1: Terms of trade

Source: Stats NZ

…with further gains expected this year…#

The ANZ World Commodity Price Index rose 3.3% in February to its highest level since April 2014, driven by high prices for dairy, meat, forestry and aluminium. In local currency terms, the index was up 2.7%. Dairy prices rose 15.0% at the GlobalDairyTrade auction this week to their highest level in 7 years (Figure 2). Whole milk powder prices rose by 21.0% and skim milk powder prices were up 3.5%.

The recent strength in commodity prices is supporting export earnings at a time when the tourism sector is struggling. The recovery in global growth is expected to support export prices and the terms of trade over 2021.

Figure 2: GlobalDairyTrade selected prices

Figure 2: GlobalDairyTrade selected prices

Source: Haver

…but border closures are providing an offset#

Stats NZ also report that spending by overseas visitors and students fell to $1.3 billion in the December 2020 quarter, down by two thirds from the same period in 2019. Although a large number of international visitors and students remain in the country, despite the borders being closed since March 2020, the absence of the usual seasonal increase in tourism over recent months is being felt acutely by some businesses.

Seasonally adjusted new dwelling consents increased by 2.1% in the month of January. In the 12-months ended January residential consents were up 5.8% to their highest level since 1974.

Multi-unit dwelling consents drove the increase, up 8.3% in the month while standalone consents fell 3.8%. Multi-unit dwelling consents issuance as a proportion of all dwelling consents issuance has been trending upwards for the last 10 years, driven by the shift to denser housing arrangements. The strong pipeline of consents bodes well for construction activity in coming months.

…but consumer confidence eases#

Consumer confidence eased 1 point to 113 in the February release of the ANZ-Roy Morgan Consumer Confidence survey and remains under its historical average of around 120.

Australian GDP rebounds…#

Australia’s GDP rebounded 3.1% in the December quarter compared to the previous quarter, to be 1.1% lower than the same quarter a year ago, a better performance than most other major economies (Figure 3). Private investment increased by 3.9% in the quarter, contributing 0.7 percentage points to growth. Household spending rose by 4.3%, though remained 2.7% down on a year ago. From a peak of 22.0% of disposable income in the June quarter, the household saving ratio declined further, reaching 12.0% in the December quarter. This is still much higher than pre-pandemic levels of around 5%. The terms of trade rose 4.7% (driven by higher iron ore prices), contributing to a 4.2% increase in nominal GDP in the quarter, the strongest growth since 1983, pushing it 0.8% above year-ago levels.

Figure 3: Real GDP in selected countries

Figure 3: Real GDP in selected countries

Source: Haver

…as the RBA maintains policy support#

The Reserve Bank of Australia (RBA) left its policy settings unchanged, with the targets for the cash rate, the Term Funding Facility and the yield on the 3-year Australian Government bond remaining at 0.1%. In light of recent bond market volatility, the RBA reiterated its commitment to maintaining the 3-year Yield Curve Control (YCC) target. It also said that it was “prepared to do more” quantitative easing if needed. The RBA does not expect to increase interest rates until 2024 at the earliest.

Manufacturing conditions mixed across Asia#

The manufacturing sectors in Thailand and Malaysia continued to contract in February, with the Purchasing Managers’ Indices (PMIs) falling to 47.2 and 47.7, respectively (Figure 4). Elsewhere in Asia, manufacturing conditions were more positive, although a slight loss in momentum is evident. In China, the PMI declined from 51.5 to 50.9. Total new work expanded only marginally, and at the weakest pace in nine months, with the global pandemic weighing on export sales. However, a notable improvement in business confidence suggests manufacturers remain positive about the global economic outlook in the coming quarters. In Indonesia, the manufacturing sector continued to expand, but the rate of growth reached a four-month low, while inflationary pressures were the strongest since late-2018.

Figure 4: PMIs in selected Asian countries

Figure 4: PMIs in selected Asian countries

Source: Haver

More fiscal spending in the UK#

UK finance minister Rishi Sunak announced a further £44 billion of fiscal spending measures in the 2021/22 budget, bringing the government’s total pandemic support to £344 billion. The furlough scheme for workers was extended until the end of September. On the revenue side, the Chancellor announced that the tax rate on company profits above £250,000 will rise from 19% to 25% in April 2023. The UK Debt Management Office will be looking to sell £296 billion of bonds in the 2021/22 fiscal year, almost £50 billion higher than market expectations, which drove bond yields higher. The economy contracted by 10% in 2020 and is forecast to grow by 4% this year and by 7.3% in 2022. It is expected that in five years’ time, the economy will still be 3% smaller than it would otherwise have been.

Date Key NZ Data Previous (apc)
9-Mar ANZBO (prelim) Own activity: +21.3
10-Mar Electronic cards  Retail: + 1.9% (apc)
12-Mar REINZ house prices  + 19.2% (apc)

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

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

Tables#

Quarterly Indicators   2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4
Real Production GDP1 qpc 0.7 0.1 -1.2 -11.0 14.0 ...
  aapc 2.8 2.3 1.6 -1.7 -2.2 ...
Current account balance (annual) %GDP -3.7 -3.3 -2.8 -1.8 -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 45.8 3.2 ...
REINZ - house price index apc 10.8 13.2 16.0 17.9 19.2 ...
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 -2.2 ...
ANZ world commodity price index apc -3.1 -2.3 -5.5 -0.4 4.6 ...
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   22-Jan 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb
Jobseeker Support number 213,357 213,006 211,806 211,026 210,573 208,335
Work Ready number 135,399 134,841 133,743 132,858 132,234 130,113
Health Condition and Disability number 77,958 78,165 78,066 78,171 78,339 78,219
COVID-19 Income Relief Payment number 660 342 0 ... ... ...
Full-time number 585 297 0 ... ... ...
Part-time number 78 45 0 ... ... ...
Daily Indicators   Thu
25/2/21
Fri
26/2/21
Mon
1/3/21
Tue
2/3/21
Wed
3/3/21
Wed
4/3/21
NZ exchange and interest rates5              
NZD/USD $ 0.7435 0.7349 0.7272 0.7268 0.7298 ...
NZD/AUD $ 0.9332 0.9362 0.9384 0.9355 0.9318 ...
Trade weighted index (TWI) index 76.7 76.1 75.7 75.6 75.8 ...
Official cash rate (OCR) % 0.25 0.25 0.25 0.25 0.25 ...
90 day bank bill rate % 0.29 0.31 0.31 0.31 0.31 ...
10 year govt bond rate % 1.79 2.02 1.89 1.75 1.73 ...
Share markets6              
Dow Jones index 31,402 30,932 31,536 31,392 31,270 ...
S&P 500 index 3,829 3,811 3,902 3,870 3,820 ...
VIX volatility index index 28.9 28.0 23.4 24.1 26.7 ...
AU all ords index 7,106 6,941 7,043 7,010 7,068 ...
NZX 50 index 12,141 12,227 12,302 12,344 12,359 ...
US interest rates              
3 month OIS % 0.07 0.07 0.07 0.07 ... ...
3 month Libor % 0.19 0.19 0.18 0.18 ... ...
10 year govt bond rate % 1.54 1.44 1.45 1.42 1.47 ...
Commodity prices6              
WTI oil US$/barrel 63.53 61.55 60.54 59.70 ... ...
Gold US$/ounce 1,780 1,742.85 1,734.15 1,723.85 ... ...
CRB Futures index 491 486.54 485.71 490.29 ... ...

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   Jul-20 Aug-20 Sep-20 2020Q3 Oct-20 Nov-20 Dec-20 Jan-21 Jan-21 Feb-21
United
States

[9.6%
share of
total goods
exports]
GDP1 qpc       7.5       1.0    
Industrial production1 mpc 4.2 1.0 -0.1   1.1 0.9 1.3   0.9 ...
CPI apc 1.0 1.3 1.4   1.2 1.2 1.4   1.4 ...
Unemployment rate1 % 10.2 8.4 7.8   6.9 6.7 6.7   6.3 ...
Employment change1 000s 1726.0 1583.0 716.0   680.0 264.0 -227.0   49.0 ...
Retail sales value apc 2.7 3.6 6.1   5.4 3.8 2.5   7.4 ...
House prices2 apc 4.2 5.4 6.7   8.1 9.2 10.1   ... ...
PMI manufacturing1 index 53.7 55.6 55.7   58.8 57.7 60.5   58.7 60.8
Consumer confidence1,3 index 91.7 86.3 101.3   101.4 92.9 87.1   88.9 91.3
Japan
[6.1%]
GDP1 qpc       5.3       3.0    
Industrial production1 mpc 8.7 1.0 3.9   4.0 -0.5 -1.0   4.2 ...
CPI apc 0.3 0.1 0.0   -0.4 -0.9 -1.1   -0.6 ...
Unemployment rate1 % 2.9 3.0 3.0   3.1 3.0 3.0   2.9 ...
Retail sales value apc -2.9 -1.9 -8.7   6.4 0.6 -0.2   -2.4 ...
PMI manufacturing1 index 45.2 47.2 47.7   48.7 49.0 50.0   49.8 51.4
Consumer confidence1,4 index 29.5 29.3 32.8   33.3 33.6 31.8   30.0 ...
Euro area
[5.5%]
GDP1 qpc       12.4       -0.6    
Industrial production1 mpc 5.1 0.8 -0.1   2.5 2.6 -1.6   ... ...
CPI apc 0.4 -0.2 -0.3   -0.3 -0.3 -0.3   0.9 ...
Unemployment rate1 % 8.6 8.6 8.6   8.4 8.3 8.3   ... ...
Retail sales volume apc 0.2 4.4 2.5   4.3 -2.2 0.6   ... ...
PMI manufacturing1 index 51.8 51.7 53.7   54.8 53.8 55.2   54.8 57.9
Consumer confidence5 index -14.9 -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 5.4 0.5 0.7   0.9 0.3 0.2   ... ...
CPI apc 1.1 0.2 0.6   0.7 0.4 ...   ... ...
Unemployment rate1 % 4.3 4.5 4.8   4.9 5.0 5.1   ... ...
Retail sales volume apc 1.1 2.7 4.5   6.0 2.3 3.1   -5.9 ...
House prices6 apc 1.5 3.7 5.0   5.8 6.5 7.3   6.4 6.9
PMI manufacturing1 index 53.3 55.2 54.1   53.7 55.6 57.5   54.1 55.1
Consumer confidence1,5 index -27.0 -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 % 7.5 6.8 6.9   7.0 6.8 6.6   6.4 ...
Retail sales value apc 12.8 5.4 6.6   7.7 12.1 10.3   ... ...
House Prices7 apc       5.0       ...    
PMI manufacturing1 index 53.5 49.3 46.7   56.3 52.1 55.3   55.3 58.8
Consumer confidence8 index 87.9 79.5 93.8   105.0 107.7 112.0   107.0 109.1
China
[24.3%]
GDP apc       4.9       6.5    
Industrial production apc 4.8 5.6 6.9   6.9 7.0 7.3   ... ...
CPI apc 2.7 2.4 1.7   0.5 -0.5 0.2   -0.3 ...
PMI manufacturing1 index 51.1 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 1.9 0.7 3.1   -0.5 0.5 2.7   -1.6 ...
CPI apc 0.3 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