November 23, 2022
November 16, 2022
Still booming: The construction sector remained strong in the June quarter. Photo/NZME
New Zealand likely avoided recession in the first half of the year with GDP figures for the June quarter likely to show the economy growing – just.
But with a lot of uncertainty around
figures – expected this Thursday at 10:45 a.m. – it would be foolhardy to exclude recession.
Banking economists at ANZ and Westpac have differing views on the data we’ve seen so far, with the former picking a pessimistic 0.4% growth figure and the latter predicting 1.6% growth .
“Consistent with an economy that lacks the resources (particularly labor) to grow, the main activity indicators going into the second quarter GDP data were quite weak,” said Miles Workman, senior economist. from ANZ.
Business and consumer survey activity indicators were very weak, as were retail sales and manufacturing data, he said.
Only the construction sector continued to outperform expectations.
But Westpac chief economist Michael Gordon pointed to the reopening of the border and the resumption of outbound tourism, which he said would give a significant boost to areas such as travel services, accommodation, arts and recreation.
“A result consistent with our view would underscore that the New Zealand economy remains far from recession. Indeed, the challenge is one of an economy running too hot,” he said.
But Gordon acknowledged the margin of uncertainty was “particularly large this time”.
“Big forces acted on the economy in the June quarter – not just the easing of the Omicron wave, but also the reduction in the Covid response,” he said.
“We expect to see big sector shifts in both directions, and it’s unclear where the balance will lie.”
SBA economists expect more moderate growth of 1.2% for the quarter.
“If our predictions (or thereabouts) are accurate, the New Zealand economy is now back to its pre-August 2021 level of output,” said ASB senior economist Nathaniel Keall.
However, it had taken 12 months to do so, unlike the dramatic rebounds we saw after the 2020 shutdowns, he noted.
“In short – and in case it wasn’t already obvious – we are well and truly in a
slower growing environment.
Growth is expected to slow further, with severe capacity constraints, painful cost pressures, higher interest rates, weaker global growth and a falling housing market all lingering themes, it said. he declares.
“But the economy is not on the verge of collapse either: we still see the possibility of a reorientation of growth towards the external sector, and we expect domestic demand to prove relatively resilient. “
One thing all economists agree on is that GDP growth for the quarter will not be as strong as the Reserve Bank’s forecast of 1.8%.
The persistence of the Omicron wave ensured that we would not get such a strong rebound.
But as ANZ’s Workman points out, even a miserly 0.4% result won’t be enough to change the course of RBNZ monetary policy.
“It is important to note that weak (or even negative) growth does not necessarily mean that the RBNZ can afford to stop monetary tightening any time soon,” he said.
“An overstimulated economy that runs into capacity limits will always hit the wall at some point, and it looks like that wall is definitely there.
“Given the current pressures on wage inflation and the consumer price index, and what business survey data continues to say about labor shortages, a significant surprise downside of RBNZ’s August MPS forecast probably doesn’t mean much for OCR metrics.”