Economic news - March 2021
Written and accurate as at: Mar 12, 2021 Current Stats & Facts
Australia
The rollout of the AstraZeneca vaccine is set to begin in March as the first 300,000 doses landed in Sydney, with 1.2 million more doses due shortly from Europe before Australian partner, CSL, begins production of 50 million doses. The federal government said Australian health professionals will soon be delivering over 500,000 vaccinations a week, with general practitioners set to assist in the Covid-19 vaccine rollout in the coming weeks. Health Minister Greg Hunt confirmed that Australia will keep its international borders shut for at least another three months with over 40,000 Australians still stuck overseas. GDP grew 3.1% in the December quarter, taking the yearly rate from -3.8% to -1.1%. The result marked the second straight strong quarter of growth as the economy continues to recover from Covid-19 led restrictions helped by high levels of monetary and fiscal stimulus.
Household consumption rose 4.3% in the quarter, after posting a record 7.9% gain in the previous quarter, while government spending rose for the tenth straight quarter, up 0.8%. Employment rose 29,100 in January, falling short of the expected 40,000 new jobs, however, the unemployment rate fell to 6.4%, below expectations of 6.5%, marking the lowest rate since April 2020 as the economy emerges from the pandemic shocks. The AiG Manufacturing PMI rose 3.5 points in February to 58.8, marking the strongest the index has been since March 2018. According to AiG, Australia’s manufacturers lifted production and employment in February as sales recovered a large share of the ground lost in 2020. The production, sales, employment and new orders indices all improved from the December and January period, with the new orders index up 5.3 points to 59.9, indicating further strong production in the coming months.
Sentiment remains strong with the Westpac-MI Consumer Sentiment Index lifting to 109.1 in February from 107.0 in January. With the JobKeeper program set to be phased out at the end of March, the ability of consumers to look ahead with confidence is critical. The ‘time to buy a dwelling’ index fell 3.1% and is now 8.6% below its peak in November. The decline in recent months suggests that increases in house prices may already be starting to weigh on the purchasing sentiment.
Retail sales expanded 0.6% in January, missing expectations of 2.0% growth, however, it was an improvement on the 4.0% decline recorded in December, aided by easing COVID-19 restrictions around some parts of the country. Food retailing led the rises, while there were falls in clothing, footwear and personal accessory retailing, household goods retailing, and department stores, which all saw impacts from interrupted trade in Queensland.
Global
Covid-19 cases continue to build globally, with around 114 million reported cases at the start of March, but the vaccine narrative is propelling the economic recovery forward, even as some regions face logistical headwinds. Fiscal and monetary policy remains extremely accommodative and is helping households and businesses through the final stages.
President Biden marked the distribution of 50 million coronavirus vaccine doses since taking office, reaching the halfway mark of the administration’s goal of 100 million inoculations within the first 100 days. An independent advisory panel voted to recommend Johnson & Johnson’s Covid-19 vaccine for emergency use, which would make a third vaccine available to Americans. A stellar jobs report for February showed the labour market recovery has been even stronger than expected.
US nonfarm payrolls rose by 379,000, well ahead of the consensus 182,000, while January’s reading was revised upwards from 49,000 to 166,000. December quarter GDP was revised up to an annualised 4.1%, while durable goods orders in January surged 3.4% month-on-month, surpassing expectations of 1.1%, boosted by a 7.8% rise in orders for transportation.
The PMI composite index came in well above expectations in February at 59.5 (58.8 expected), up from 58.7 in January, while the services index also surprised to the upside at 59.8 (58.9 expected). Retail sales jumped 5.3% in January, beating expectations of 1.1%, marking the largest increase since June 2020 as new stimulus checks helped to boost consumer spending. Personal income rose 10.0% in January (9.5% expected) and personal spending also rose broadly as expected, gaining 2.4%. The VIX remains at elevated levels compared to the pre-Covid regime
Following strong growth in the third quarter, Europe's economy contracted 0.4% in the December quarter as the pandemic tightened its grip on the continent, while the EU was forced to cut its growth forecast for 2021 from 4.1% to 3.7%. The race to inoculate has been derailed by logistical challenges and shortages. In Germany, only 6% of the population has received the first dose, while the German government was forced to reverse its decision not to authorise the AstraZeneca vaccine for people over the age of 65.
Across the channel, over 20 million people in the UK have received their first doses of the vaccine, coinciding with daily case numbers at their lowest since September 2020. Prime minister Johnson announced a four-stage plan to lift restrictions in England, with all restrictions on social conduct to be lifted by June.
Overall, the recovery story remains intact albeit dilated. The economic sentiment index for the eurozone improved from 92.0 to 93.4 in February as the outlook for vaccine rollouts and easing of restrictions bolstered confidence. The IHS Markit Eurozone Manufacturing PMI surprised in February, lifting 2.9 points to 57.7 against expectations of a fall to 54.3. January’s retail sales came in well below expectations, falling 5.9%, while the unemployment rate held steady at 8.1%.
After managing economic growth of only 2.3% in 2020, its weakest in decades, the Chinese government is aiming for a significant rebound in 2021. At the opening of this year’s National People’s Congress, Premier Li Keqiang announced a growth target of over 6.0%, which appears almost modest compared to the IMF’s estimate of 8.1% growth for 2021. The Chinese authorities appear to be focused on the quality of growth, including reform and innovation, rather than pure numbers. China is relying on two domestically developed vaccines and is competing with Russia in conducting ‘vaccine diplomacy’ throughout central Asia, although based on data from Brazil, China’s Sinovac jab showed an efficacy rate of just over 50%, which is well below Pfizer’s 95% efficacy rate.
Japan’s vaccine campaign has stalled due to shortages, with only limited doses of the Pfizer vaccine available until increased supplies can reach Japan from Europe, which is expected to be around May. Japan’s GDP is expected to expand 3.0% in the fourth quarter, down from 5.3% in the previous quarter, while the yearly rate is expected to move lower to 12.8%. Retail sales growth fell from -0.2% to -2.4% year-on-year in January, while preliminary industrial production numbers revealed a rebound of 4.2% in January following the 1.0% contraction in December.
Commodities
Oil prices jumped over February as the economic recovery solidified and boosted by reports that oilfield crews in Texas may need several weeks to resume normal operations after last week’s record freeze. The spot price of WTI crude rose 18.0% to US $61.55 per barrel and Brent rose 19.2% to US $65.86 per barrel. Base metals were stronger in February, with gains in Copper (+15.5%), Tin (+12.7%), Aluminium (+9.0%), Zinc (+8.3%), Nickel (+5.0%) and Lead (+1.4%). The gold price fell 6.1% to US $1,734.04 per ounce.
Currencies
The Australian dollar resumed its upward climb in February, gaining 2.4% against the US dollar to end the month at USD 0.78, boosted by record trade figures. Rising yields, led by the US Treasury market, could represent an obstacle for the Australian dollar moving higher, while the RBA is committed to keeping monetary policy as accommodative as possible, but fundamentals remain robust.