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Economic update - April 2021

Written and accurate as at: Apr 13, 2021 Current Stats & Facts


With no community transmitted Covid-19 cases, the Queensland government ended the snap three-day Brisbane lockdown but maintained some mask-wearing and social distancing measures. Whether tight elimination lockdowns or more moderate versions will be needed as Australians get vaccinated is still up for debate. The Australian government announced a preference for the Pfizer vaccine for Australians under 50 amid concerns of rare blood clots potentially linked to the AstraZeneca vaccine. In economic news, February employment numbers surged by 88,700, accentuated that the entire increase came from full-time jobs with employment now above the pre-pandemic level.

As widely expected, the RBA maintained its current accommodative monetary policy settings at its April meeting. The board noted that it remains committed to the 3-year government bond yield target of 0.10% but will consider whether it retains the April 2024 bond or shift to the next maturity date. Preliminary building permits jumped 21.6% in February, soundly beating expectations of 5.0% and reversing from a 19.4% slump in January. New Zealand announced plans to open a two-way, quarantine-free trans-Tasman travel bubble, with the option to continue, pause or suspend if a case is detected in Australia.

Australia’s manufacturing sector continued to expand in March, with the AIG Manufacturing PMI rising 1.1 points from 58.8 to 59.9. All six manufacturing sectors reported positive trading conditions during March, with especially buoyant conditions reported by manufacturers in machinery and equipment and textiles clothing, footwear, paper & printing products. Separately, the latest Markit survey showed the seasonally adjusted manufacturing PMI continued to expand, albeit at a slightly slower pace of 56.8, down from 56.9.

The Westpac-Melbourne Institute Index of Consumer Sentiment rose 2.7 points in March to 111.8 and is now just 0.2 points below the December level, which was a ten-year high. Key contributors to sentiment have been improving economic conditions on the back of global and local efforts to distribute vaccines in tight labour market conditions following a spike in unemployment during the pandemic. Support from stimulatory government policies has also contributed to the sustained lift.

Retail turnover was soft in February, falling 0.8%, but showed a 9.1% increase through the year, demonstrating the importance of consumers in driving the recovery. Department stores saw the strongest rise over the month, adding 2.2%, while food retailing fell 3.0%. Sales are expected to soften as JobKeeper, and JobSeeker support concludes, while the recovery will continue to be uneven, with travel retailers and SME’s in CBD locations bearing the brunt of the pandemic fallout.


Global Covid-19 cases continue to rise, with over 130 million cases reported in early April, but the vaccine narrative still propels economic recovery. The rollout has been slower than many had hoped, but the US and UK are now making strong progress. The International Monetary Fund is forecasting the world economy to expand 6.0% in 2021, up from the 5.5% forecast in January.

The US economy continues its upward trajectory, with recent data pointing to an upswing in activity and improving confidence as the vaccine rollout increases the pace. More than 100 million people have received at least one coronavirus vaccine dose, and over 1 million doses were administered on a single day. The IMF expects US GDP to grow by 6.4% in 2021, an upgrade of 1.3 percentage points, driven largely by the Biden administration’s $1.9 trillion stimuli.

The manufacturing index rose to 59.0 as expected, while the services index surprised to the upside at 60.0 (above the expected 59.1). The ISM non-manufacturing PMI continued to strengthen in March, lifting from 55.3 to 63.7 and easily surpassing expectations of 59.0. The reading pointed to the strongest growth in services activity on record as the easing of coronavirus-related restrictions released pent-up demand for many services.

Non-farm payrolls for March came in strongly at 916k, beating expectations of 647k, while consumer confidence surged 19.3 points in March to 109.7, beating expectations of 96.9. The Federal Reserve maintained its accommodative policy stance at its March meeting, as widely expected. Fed Chair Jerome Powell stated that the unevenness in the economic recovery would see monetary policy remain accommodative.


Europe’s battle against the coronavirus took a backward step as France and Italy were forced to impose nationwide lockdowns ahead of the Easter weekend following a surge in cases. France’s President Macron announced that the lockdown rules currently in operation in 19 French departments, including the Paris region, will be extended to the rest of the country and remain in place for at least four weeks. German Chancellor Angela Merkel said she favours a “short national lockdown” as the country struggles to bring case numbers under control with a surge in the British variant.

Meanwhile, the UK remains on a steady path out of its three-month lockdown as the government considers a ‘vaccine passport’ to allow travellers proof of their inoculation. However, equitable concerns have been raised for those unable to access vaccines. UK GDP expanded 1.3% in the fourth quarter, surpassing expectations of 1.0%, while the yearly rate improved 1.2% to -7.3% (-7.8% expected).


China is ramping up its vaccine diplomacy, with Chinese-made vaccines being used to inoculate millions of people in dozens of countries worldwide. China is still lagging the US in the number of people vaccinated, prompting the Chinese Centre for Disease Prevention and Control to up its target for the number of people injected to 560 million, or 40% of its population end of June.

China's economy returned to pre-pandemic levels last year and is projected by the IMF to grow by a further 8.4% in 2021, in contrast to most other major economies, which will not return to their pre-pandemic size until 2023 at the earliest. In terms of recent economic data, retail sales surged 33.8% year-on-year in the January-February period, above expectations of 32.0%, as sales cycled last year’s lows due to the coronavirus shutdown.


A slow vaccine rollout and trepidation have stymied japan’s economic recovery among consumers as daily cases continue to climb. The key focus for the government is the vaccination of people aged 65 and over, of which there are around 36 million. Once a critical mass within this demographic receives the vaccine, the government expects personal consumption to get a significant boost.


India reported more than 100,000 daily Covid-19 cases in early April; a grim measure achieved only by the United States and Brazil. However, despite the pandemic's economic pain, which caused a record 8.0% drop in GDP over 2020, the IMF forecasts a 12.5% rebound in 2021 and further growth of 6.9% in 2022. India—along with the US, China, Indonesia and South Korea—will be among the only major economies to exceed pre-pandemic GDP levels by the end of 2021


Oil prices softened over March as ongoing lockdowns, and delays to vaccine rollouts counteracted the recovery optimism. The Brent spot price fell 3.6% to US$63.5 per barrel, and the WTI spot price fell 3.8% to US$59.2 per barrel. Oil prices jumped late in March amid concerns. The increased oil price could disrupt global supplies of crude and refined products for weeks as workers try to dislodge a giant container ship blocking the Suez Canal.

Base metals were mostly down in March, with falls in Nickel (-13.5%), Lead (-3.8%), Copper (-3.2%) and Tin (-1.1%), and gains in Aluminium (+2.7%) and Zinc (+0.9%). The gold price fell 1.3% to US $1,712 per ounce.


The Australian dollar was under pressure in March, softening 2.9% against the US dollar to end the month at around USD 0.76. Rising Treasury yields in the US have been supportive of the greenback, while the risk-on sentiment has also supported ‘commodity currencies’ like the Australian dollar in recent months. Both the RBA and US Federal Reserve remain highly accommodative.

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