No recession: Economic growth stronger than expected

The economy grew 0.9 per cent in the second quarter, lifting the country out of recession and exceeding expectations.

In fact, based on revisions to earlier numbers, the economy may not have been in a technical recession at all.

GDP rose 3.2 per cent in the year ended June 2023.

Strong net migration buoyed the numbers but the better than expected performance from sectors like manufacturing meant growth remained marginally positive even on a per capita basis.

Economists had forecast New Zealand would rebound back into growth in the second quarter of the year.

Estimates for June quarter GDP (gross domestic product) ranged from growth of 0.4 per cent to growth of 0.8 per cent.

But higher dairy, forestry, and meat exports helped drive the growth of 0.9 per cent in the second quarter.

“Business services was the biggest driver of economic growth this quarter, largely due to computer system design,” Stats NZ economic and environmental insights general manager Jason Attewell said.

Stats NZ today said manufacturing activity increased in the second quarter after five consecutive quarters of decline.

The rise reported today followed a flat (0 per cent) March 2023 quarter, revised up from -0.1 per cent, and a decline of 0.5 per cent in the December 2022 quarter (revised from -0.7 previously).

Westpac senior economist Darren Gibbs noted that after the small upward revisions “the technical recession has been revised away, at least for now.”

Westpac was been the most upbeat of big banks, picking 0.8 per cent growth for the second quarter.

ASB’s Nathaniell Keall described the rise as “meaningfully stronger than expected”.

“Net migration figures continue to prove strong and may be continuing to prop up growth on a headline basis,” he said. “On a per capita basis, GDP rose a more meagre 0.2 per cent over the quarter.”

Many economists expect rising interest rates and low export prices could lead the country to slip back into recession later this year or early next.

“The New Zealand economy continues to prove more resilient than expected, but we continue to expect growth to slow over the next twelve to eighteen months,” said Keall.

ANZ has warned that any rebound would be a “dead cat bounce” - reference to popular stock market slang for a false rally, before a troubled company resumes its slide.

“We’re expecting payback for the capacity-constrained, cyclone-caused, stunted growth over the summer period,” Kiwibank senior economist Mary Jo Vergara said last week.