GDP figures expected to show chance of ‘triple-dip’ recession

Monday, 16 September 2024

Figures released by Stats NZ on Thursday are expected to show the economy may have slipped back into recession for the third time in less than two years.

ANZ is forecasting the figures will show the economy shrank by 0.1% in the three months to the end of June, after returning to 0.2% growth in the prior quarter, while Westpac is predicting a 0.4% decline.

The Reserve Bank last month forecast a steeper 0.5% drop in economic activity in the June quarter.

Any fall in GDP would mean the country could be experiencing a “triple-dip” recession, hot on the heels of recessions in the six months to March last year and during the second half of last year.

However, that wouldn’t become clear until after Stats NZ reports the third quarter GDP figures shortly before Christmas, as a recession is commonly defined in New Zealand as two consecutive declines in GDP.

Westpac senior economist Michael Gordon described the recessions as a “rolling maul”.

Most sectors of the economy were likely to have shrunk during the quarter, with consumer spending particularly weak as people grappled with high interest rates and the rising cost of living, he said.

Ironically, the update on past economic activity will come at a time when surveys of business and consumer confidence are showing growing confidence that the economy will be in better shape in a year’s time than it is now.

Sentiment is usually one of the first things to improve ahead of an economic recovery.

However, some economists have warned that while economic activity may pick meaningfully in the short-term, after falling into a pit in July, the pace of any recovery may not be sustained.

Westpac chief economist Kelly Eckhold cautioned in July that the country might experience a two-speed recovery, with an initial bump in growth getting the economy back to where it was a few months ago, followed by a slower upward grind.

ANZ said there was plenty of uncertainty about Thursday’s GDP figures, but it didn’t expect them to be a “game changer” with respect to the Reserve Bank’s consideration of interest rates.

Gordon agreed that with the risk of a sharper-than-expected downturn “now fading”, the Reserve Bank was likely to return its focus to inflation data.

Immigration data released by Stats NZ on Tuesday estimates net immigration sank to 1899 in the three months to the end of June, versus a net influx of 15,423 the prior quarter.