July 01, 2020

Introducing the NZAC

The New Zealand Activity Index (NZAC) was unveiled on 30 June and it was created by Statistics New Zealand, the Treasury, and the Reserve Bank of New Zealand. The NZAC has been created to provide a timelier signal of movements in the New Zealand economy. Because of this desire to be timely, the NZAC will be released monthly, while other measures of economic activity, such as GDP, are released quarterly.

The NZAC has been constructed using a similar methodology to that used to construct the Chicago Fed National Activity Index (CHNAI) produced by the Federal Reserve Bank of Chicago, and the Weekly Economic Index (WEI) produced by the Federal Reserve Bank of New York. These indexes aim to closely track the movement of economic fundamentals that drive the movements of the indicators included in the index.

At present the NZAC comprises eight indicators of economic activity (shown in the table below), covering consumer spending, unemployment, job vacancies, traffic volumes, electricity generation, business outlook, and manufacturing activity. Additional variables may be added in the future, but in order to ensure the timeliness of the NZAC, variables published or released more than 14 days after the end of the month, are currently not being considered.

This 14 day cut-off mark has meant that other monthly datasets, such as international trade (exports and imports), employment, performance of services (PSI), building consents, and tourism expenditure, have not been considered for use. 

Table of indicators
Source/series Timeliness
ANZ activity outlook - 3 days
MSD jobseeker numbers (work ready) 7 days
ANZ truckometer - light traffic 11 days
ANZ truckometer - heavy traffic 11 days
SNZ electronic card transactions (ECT) 12 days
Electricity generation (hydro + thermal) 14 days
SEEK new job listings 14 days
BNZ/BusinessNZ Performance of Manufacturing Index (PMI) 14 days

From June 30, the NZAC, along with the data that feeds into it, will be available on the Statistics New Zealand COVID-19 data portal.

With the release of the NZAC, there is an opportunity to consider the pros and cons of creating such an index of economic activity. My opinion of the indexes pros and cons are noted below.

The NZAC has clear pros and cons


Overall the NZAC will provide a timely indicator of economic activity, compared to GDP, which is produced quarterly in New Zealand, with a lag time of close to three months. While the NZAC is not related to, or comparable with, GDP, it does provide more up-to-date signals of upwards or downwards movements in economic conditions, and it correlates well with historic GDP movements.

The NZAC is a weighted average of the eight indicators (shown in the table above). Due to the way it's constructed, it is able to capture the common movements across all eight indicators, while filtering out some of the noise associated with individual indicators. This makes the index more valuable than its individual components. Or, to express it another way, the index is greater than the sum of its parts.

Lastly the NZAC provides a signal of economic activity movements well in advance of more conventional indicators. Given the current COVID-19 pandemic, and the economic turmoil it has created in the global economy, a timelier signal of economic activity will be very useful for tracking the country’s economic recovery over the next few years.


The main issue with the NZAC is the lack of current coverage of some of New Zealand’s largest economic sectors, such as construction, primary industries and services. At present some of this lack of coverage is due to the 14 day cut-off being used to ensure the index is released in a timely manner. This precludes the use of monthly data series that are released in the second half of the month, such as exports and imports, employment indicators, building consents, and the performance of services (PSI) data series.

The lack of available data in some sectors, also plays a role in the lack of coverage within the NZAC, such as tourism and construction.

Overall in my opinion, the introduction of the New Zealand Activity Index will provide a valuable contribution to monitoring New Zealand’s economic activity.