ANZ (ASX:ANZ) share price dips as bank flags cost of Sydney lockdowns

An extended lockdown is expected to weigh on the Australian economy in the September quarter.

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Shares in Australia and New Zealand Banking Group Ltd (ASX: ANZ) are trading lower on Wednesday, down 0.68% to $27.72.

Headlining today’s challenges for the ANZ share price and the broader S&P/ASX 200 Index (ASX: XJO) is likely to be the Sydney lockdown, extended for another four weeks to 28 August.

Lockdowns weigh on the ANZ share price

According to an ABC news report today, the economics teams from the Commonwealth Bank of Australia (ASX: CBA) and ANZ are forecasting major contractions in the Australian economy for the September quarter.

The report said the ANZ predicted a 1.3 per cent slide for the economy over the June quarter.

“CBA is also more pessimistic about the economic impact of the lockdown within the September quarter, predicting a 2.7 per cent slump in activity.”

This comes hard on the heels of upbeat commentary from the RBA July monetary policy meeting, where it said:

… the Australian economy was transitioning from recovery to expansion. GDP had increased by a stronger-than-expected 1.8 per cent in the March quarter to be almost 1 per cent above its pre-pandemic level. The solid momentum in growth had continued into the early part of the June quarter.

Hopeful rebound on the horizon

Both ANZ and CBA are optimistic about an economic rebound in the last three months of the calendar year, according to the ABC report.

“CBA is forecast a 1.9 per cent lift, which would not completely erase the fall in the current quarter, although ANZ’s economists believe Australia’s economy will play catch up with stronger growth (from a lower base) in 2022.”

This is in line with observations from the RBA’s July meeting, where board members said:

… as observed following earlier lockdowns, spending was expected to rebound when containment measures were eased, supported by highly accommodative policy settings, the strengthened balance sheets of many households and firms, and an increase in the pace of vaccinations.

A range bound ANZ share price

The ANZ share price is up an impressive 20% year-to-date. But most of the headway was made between January and early March.

The ANZ share price has since struggled to break above $29.50 but has been bouncing strongly off lows of $27.00.

With the Australian economy now expected to take a turn for worse, ANZ investors might have to brace for more volatility leading into the August reporting season.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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