Economic Forecast GDP figures for the June 2024 quarter are due on Thursday, September 19.
Expert Forecasts Economists at major banks are forecasting between -0.3% and -0.4%. ANZ is forecasting a -0.1% decline, while the Reserve Bank of New Zealand is forecasting -0.5%.
New Zealand Economic Outlook
Limited positivity: Despite the challenges, GDP for the March 2024 quarter did not show any decline. This means we are not officially in recession.
Ongoing challenges: The economy remains in a tight spot, however. The past few years have seen prolonged recessions.
Growing numbers: Data shows GDP contracted in four of the previous six quarters. With a negative forecast for the June quarter, it looks like five out of seven quarters will see a slowdown.
More forecasts: The Reserve Bank of New Zealand also expects the current quarter, September, to show negative results. If this comes to pass, we will have six out of eight quarters with negative figures. These forecasts highlight growing concern about New Zealand’s economic performance, which calls for immediate action to support growth.
The current string of negative GDP results can be compared to some of the more notorious economic struggles of the past. For example:
In 1988-91 we had six out of nine quarters of negative GDP, followed by a short but severe two-quarter recession in 1992 for further measure.
During the 1997 Asian crisis, we had four out of five quarters of negative GDP.
Since early 2008 and the global financial crisis, we have had five consecutive quarters of negative GDP. However, even the bleak numbers do not necessarily capture the “true” level of gloom.
New Zealand’s economic outlook and the impact of the recession
Perhaps the most telling measure of GDP is GDP per capita – the amount produced by each person in the country. So how are we doing on this front at the moment?
More hands produce less: You won’t have missed the fact that as soon as our borders opened again after the pandemic, thousands of additional people started pouring in. This means that our underlying GDP figures, while bad, were produced by many more people. They are therefore worse than they appear at first glance. The current economic slowdown we are experiencing, on a per capita basis, is more severe than the global financial crisis.
New Zealand’s economic outlook and the impact of the recession and the decline in GDP per capita: GDP per capita fell by 4.2% during the global financial crisis. In the current recession, up to the first quarter of March 2024, it has fallen by 4.3% since the third quarter of 2022.
Negative outlook: Looking at the likely outcomes for the second quarter of June 2024, GDP per capita is expected to fall again. The decline is likely to be larger than the 4.3% currently recorded. Clues from key sectors: We can draw some clues from the Q2 2016 results, which show poor performance from key sectors. The data shows that retail sales volumes fell by 1.2% in the last quarter of June 2024.
Available data: When comparing the last quarter of June 2024 with last year, the decline in sales volumes is around 3.6%. This shows the difficult conditions facing the country’s retail sector. Therefore, the current economic situation in New Zealand may present significant challenges, which requires urgent attention from policymakers to support growth and improve economic conditions.
New Zealand Economic Analysis and the Impact of Recession
Construction volumes fall
Construction volumes fell by 0.2%, less than some experts had expected. However, this is the lowest level of construction since June 2020, which was affected by the Covid-19 pandemic.
Manufacturing sales surge: However, manufacturing sales volumes saw a strong increase of 0.6% after three consecutive quarters of declines. In contrast, seasonally adjusted wholesale sales fell by 1.1% in the quarter ended June.
The big picture: Despite the negative numbers, their impact does not appear to be significant at this point. The second quarter figures are somewhat ahistorical, meaning that forecasts may be off.
Are we nearing the bottom of the cycle? :The Reserve Bank of New Zealand cut its cash rate from 5.5% to 5.25% in August, raising questions about the end of the current economic cycle. The GDP figures are not expected to influence the bank’s decisions.
Forward-looking: If GDP is greater than -0.5% as the bank forecasts, it may consider cutting interest rates twice (50 basis points). Financial markets continue to expect a double rate cut before the end of the year, but this could be optimistic.
New Zealand Economic Outlook: Bottom Signals and Future Shifts
Waiting for Bottom Signals: We are looking for signs from June’s GDP figures that the bottom has been reached. Hopefully, some positives will emerge and encourage optimism that the future is “less bad”. However, the situation is not turning good quickly.
Q3 recession expected: As previously mentioned, the Reserve Bank of New Zealand is forecasting a contraction in the third quarter of September. This is a major challenge to restoring growth.
Rate cuts as a stimulus tool: The August rate cut, with the promise of further cuts, could help improve conditions. GDP could start to turn positive in the current quarter.
