A second wave of the COVID-19 pandemic is sweeping the world, even as New Zealand’s containment measures remain robust. The rising tide of cases could stymie economic rebounds expected globally, with negative implications for New Zealand’s export potential heading into 2021.

Global daily cases of COVID-19 have accelerated in recent weeks, with over 400,000 recorded on 16 October – the first time this grim milestone has been reached. Daily case numbers are up by around 80,000 per day (a 27% increase) from September. Chart 1 shows that the pandemic is nowhere near over, and the resurgence of cases threatens any moves to reduce restrictions globally.

Europe is currently the epicentre of the COVID-19 resurgence, with average daily cases nearly tripling in the last month from 51,000 to 148,000. Cases in the Americas are also up 10% from a month earlier, but cases in Asia have are slowing as India wrestles back control (see Chart 2).

Global growth expectations have continued to adjust downwards, with September Consensus forecasts showing a 4.6%pa decline in world activity is now expected for 2020. However, this weakening in expectations has not been repeated everywhere. Growth expectations for North America and China in September were similar to expectations in April. This levelling off a view that the hit from the pandemic, although large, is somewhat controlled. However, growth expectations for Western Europe have fallen considerably between April and September. Combined with a markedly more pessimistic view of activity in Eastern Europe and Latin America, global growth expectations have continued to fall (see Chart 3).

The pandemic’s resurgence globally will exacerbate pressure on trade moving forward. Not only will the resurgence reduce incomes overseas and therefore limit export demand, but restrictions on activities will force exporters to pivot to meet changing demand patterns. New Zealand’s meat and wine sectors are clear examples of pivoting.

Data from OpenTable shows that global restaurant dining activity is down by nearly 40%pa. Exports that have traditionally been concentrated on premium-end restaurant consumption are now trying to focus on at-home consumption, due to people spending more time at home and restrictions on gatherings (see Chart 4).

Concerns are mounting that this shift in exporter focus won’t be enough to stop a sharp decline in meat export revenue in 2021. Beef + Lamb expect lamb export values to fall nearly 15%pa, and beef exports to fall by 9%pa next year.

We’ve profiled the continuing issues in the global economy before, but the rise in COVID-19 cases has put us back on alert for even weaker global economic activity moving ahead. New Zealand can only operate in isolation from global trends for so long given the importance of trade to our economy. Even with New Zealand’s solid economic performance recently, the risk of a sustained global slowdown will be alarming to our export sector.