Economic Week - July 31

by Nick Clark

Exports up, imports stable

June’s exports were bolstered by dairy and meat, while the arrival of HMNZS Aotearoa helped keep imports afloat, according to Statistics NZ’s monthly Overseas Merchandise Trade Statistics.

In June 2020 goods exports were worth $5.1 billion, up $107 million (or 2.2%) compared to June 2019, with dairy and meat leading the way.  Exports of milk powder, butter and cheese were up $90 million (or 7.9%) to $1.2 billion, while exports of meat and edible offal were up $49 million (or 7.2%) to $723 million.  However, wool exports were down $16 million (or 46.2%) to $19 million.

Goods imports were worth $4.6 billion, up $11 million (or 0.2%) compared to June 2019.  Taking off the one-off import of Aotearoa, goods imports would have been down $384 million (or 8%) to $4.2 billion.  There were particularly steep falls for vehicles, parts, and accessories (down 44.7%) and for petroleum and products (down 45.1%).  There was a monthly goods trade surplus of $426 million for June 2020, up $96 million on June 2019’s surplus.

For the year to June 2020, goods exports were worth $60.2 billion, up $823 million (or 1.4%) on the previous year.  Again, meat and dairy were big growth drivers, and taking off their growth overall exports would have fallen.  Exports of milk powder, butter and cheese were up $1.5 billion (or 9.9%) to $16.6 billion, while exports of meat and edible offal were up $634 million (or 8.3%) to $8.3 billion.  Forestry exports were down $1.2 billion (or 21.0%) to $4.3 billion and wool exports were down $117 million (or 21.1%) to $434 million.

Goods imports were worth $61.4 billion, down $3.0 billion (or 4.6%). There were again steep annual falls for vehicles, parts, and accessories (down 15.2%) and for petroleum and products (down 15.6%), but also for aircraft and parts (down 40.7%). 

There was a $1.2 billion goods trade deficit for the year to June 2020, a significant narrowing of the $5.0 billion deficit for the previous year.

 

Business confidence weakens

The final results for ANZ’s July Business Outlook Survey have weakened a little from the preliminary results released earlier in the month.

Overall, a net 31.8% of respondents expect general economic conditions to worsen over the next 12 months, 2.0 points lower than preliminary results but still a 2.6 point improvement from June.  It was similar for own activity, a better predictor for economic growth.  A net 8.9% expect their own activity to reduce over the next 12 months, 2.1 points lower than preliminary results, but 17.0 points better than June.

Agriculture continues to be the most pessimistic sector, with a net 54.5% expecting general economic conditions to worsen (a 9.1 point improvement from June) and a net 15.2% expecting own activity to reduce (a 1.5 point improvement from June). It was also the most negative sector for export intentions, profitability, credit availability, investment intentions, and employment intentions.  

 

Jobs recovering

Employment continues to recover from the substantial fall in April, with rises for both May and June, according to Statistics NZ’s monthly Employment Indicators.

The rises over the past two months (or 14,399 and 2,053 respectively) follow a sharp drop of over 35,564 jobs that occurred in April, when the full COVID-19 lockdown was in place. However, June’s filled jobs was still 19,112 jobs lower than in March.

Actual gross earnings for the June 2020 month were $11.2 billion, compared with $10.3 billion for the June 2019 month. Monthly earnings data is variable due to payday timings.

 

Dwelling consents edge up in June

Statistics NZ’s Building Consents Issued showed a seasonally-adjusted 3,349 new residential dwellings consented in June 2020, up 0.5% on May. For the year-ended June 2020, the actual number of new dwellings consented was 37,614, up 8.1% from the June 2019 year.

Meanwhile, the annual value of non-residential building work consented was $6.8 billion, down 8.8% from the June 2019 year.  $294 million worth of farm buildings consented, down 9.6%.

 

NIWA Soil Moisture Data

NIWA’s latest soil moisture maps (as at 9am Thursday 30 July) show a fairly similar situation to last few weeks, with most of the country’s soils about average for this time of the year.  The areas with significantly dryer than usual soils are Rangitikei, South Canterbury, Waitaki, and eastern parts of Central Otago.



Exchange Rates

The NZ Dollar weakened over the week against the TWI and against all our major trading partners.  However, the drops against the US Dollar and Chinese Renminbi were relatively small.

 

 

NZ Dollar versus

This Week

(30/7/20)

Last Week (23/7/20)

Last Month (30/6/20)

Last Year (30/7/19)

US Dollar

0.6654

0.6666

0.6426

0.6625

Australian Dollar

0.9273

0.9339

0.9353

0.9605

Euro

0.5653

0.5760

0.5713

0.5948

UK Pound

0.5127

0.5235

0.5220

0.5445

Japanese Yen

69.92

71.42

69.21

72.08

Chinese Renminbi

4.6554

4.6692

4.5411

4.5637

Trade Weighted Index

72.47

73.06

71.39

73.09

Source: Reserve Bank of NZ

 

Wholesale Interest Rates

Over the course of the week the 90 Day Bank Bill interest rate was unchanged while the rate for 10 Year Government Bonds was down 4 points. The OCR will next be reviewed on 12 August.

 

 

This Week

(30/7/20)

Last Week (23/7/20)

Last Month (30/6/20)

Last Year (30/7/19)

OCR

0.25%

0.25%

0.25%

1.50%

90 Day Bank Bill

0.30%

0.30%

0.30%

1.49%

10 Year Government Bond

0.82%

0.86%

0.91%

1.48%

Source: Reserve Bank of NZ