Terms of trade and manufacturing figures indicate the economy is heading for a technical recession, says Bank of New Zealand senior economist Geoff Mason.
A "fairly poor net export picture," pointed to GDP's shrinking by around 0.9 per cent in the June quarter, despite better-than-expected terms of trade figures, Mr Mason said.
That compares with the Reserve Bank's forecast of a 0.2 per cent contraction in the economy. And, rather than achieving the 0.5 per cent growth the Reserve Bank is forecasting for the September quarter, Mr Mason is forecasting another negative quarter of around 0.3 per cent.
However, Mr Mason said New Zealand did not really have recessionary conditions, as the economy was coming down from sharp growth last year of nearly 6 per cent and employment was relatively strong.
"Two consecutive quarters [of declining business activity] is a recession, but we have seen a real rapid increase in GDP last year from a low base and it was unsustainable.
"Now we have seen that slow down just as quickly."
Other economists were more optimistic.
Deutsche Bank NZ chief economist Ulf Schoefisch, for example, forecast a 0.8 per cent contraction for the June quarter but a reasonable rebound in the September quarter to give a small positive growth of around 0.4 per cent.
ANZ Bank chief economist Bernard Hodgetts expected the June quarter would be flat while the third quarter would see reasonable growth of 0.5 per cent.
Although yesterday's export-import price data was relatively good, showing export prices up 3.8 per cent in the June quarter against import price rises of 2.6 per cent, the volume picture was not so good.
Export volumes rose 2.4 per cent while import volumes were up 6.9 per cent, but the net import-export position is flat after allowing for one-offs. But construction and consumption were down, and Mr Mason said GDP was likely to fall by nearly 1 per cent in the June quarter.
The slowdown in household spending was likely to show up in the September quarter, he said.
June quarter manufacturing figures were also not particularly good, with the seasonally adjusted manufacturing sales up 0.7 per cent in the June quarter but down 0.6 per cent when inflation is considered.
Mr Mason said stock build-up, particularly in the dairy industry, pointed to lower production later this year.
He forecast growth of 3.5 per cent next year, thanks to the low dollar.
"We are relatively confident that the economy is going to be doing better next year because of where the currency is now."
Mr Schoefisch was more optimistic: "Once the economy gets out of this slump there is a lot of momentum there.
"It's all part of this transition to a more export-led economy. It's just not going very smoothly - big structural adjustments rarely go smoothly."
- NZPA
BNZ gloomiest GDP forecaster
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