One of the (many) surprising aspects of the economic impact of COVID-19 is how well NZ goods exports have held up relative to goods imports during the pandemic. As an exporter, NZ is vulnerable to a fall in global demand – although one of the key lessons is that the fall in demand has not been evenly shared across economic sectors. With countries resorting to lockdowns once the virus spread escalates, demand for types of goods have shifted. For example, from eating out to eating at home – putting pressure on wholesale supply chains to quickly divert food from restaurants to supermarkets and meal kit delivery services. Likewise, less money is spent on commuting, but more money has been spent on technology to improve the home office. With NZ’s exports of goods skewed toward food, and given the world still needs to eat, NZ exports held up relatively well to date. In contrast, NZ’s imports of goods plunged in April and have been slow to recover – and will only return to year-ago levels in November (see NZ trade indicators in our weekly chart pack).
But why have NZ imports been slow to recover, when electronic spending data point to a strong recovery in retail therapy? The answer may lie in a shipping capacity shortage. COVID-19 severely disrupted trade flows earlier this year and the logistics of global trade have faced a number of unprecedented challenges this year. Once the economic activity started to resume from the initial lockdown, the ability to send goods from A to B became complicated. With international boarders closed and air passenger demand collapsing, the ability to send goods by air freight has become severely impacted. Even with airlines repurposing passenger planes to be freight-only planes, the number of weekly global commercial flights in November remains 2/3 of February flights. This has seen shipping demand surge.
The RWI/ISL Container Throughput index (chart opposite) can be viewed as an indicator of global shipping trade – while activity plunged during the early days of the global pandemic, by September container shipping activity has surged to be 5% higher than pre-COVID levels. This has spilled over into higher shipping costs and reports of delays getting goods out of key shipping hubs – such as China. These challenges are also underscored by a number of anecdotes in NZ of supply shortages of imported goods, such as car parts, construction materials and retail goods. With shipping indicators demonstrating that global demand is now running ahead of supply, the question is how quickly will cost pressures support a recovery in generalised inflation pressures – particularly in a country like NZ which is in a fortunate position to be largely COVID free. In the meantime, we suggest doing your Christmas shopping early this year to avoid missing out.
Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008. As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts. In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.
During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy. Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors. She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.
Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand. Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours. In 2014, she took a career break from ASB to travel the world and learn to snowboard.
Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.
His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.
Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.
Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.
When not at work Mark likes to travel, keep fit and spend time with his friends and family.
Mike joined ASB in 2019 armed with almost 15 years of experience in applied macroeconomic and financial markets analysis.
Mike's career has been all about distilling the risks and opportunities of economic and financial market trends for business. Basically asking the "what does it all mean" question. Mike's enthusiasm and skill for drawing out practical, commercial insights from the murky world of economics has been honed over a relatively broad base of experience.
After spending the early part of his career on the tools at the Reserve Banks of both NZ and Australia, Mike had a lengthy stint at BNZ where he was NZ’s top-ranked currency strategist. His regular and topical macro research also saw him pick up several FX forecast accuracy gongs from Bloomberg.
Drawn in by the prospect of putting strategy into practice, Mike moved from Wellington to Auckland in 2013 to join Fonterra as GM Treasury Risk Management. In this role, Mike lead Fonterra’s macroeconomic research output, and was responsible for the strategy and execution of Fonterra’s foreign exchange, debt, and interest rate hedging programmes.