New Zealand may already be in recession, a monthly Treasury report said today.
"The past month has seen the release of data that confirm a sharp slowing of growth in early 2008 and point to further weakness in the June 2008 quarter," the June report said.
"It ispossible that the economy has experienced a technical recession (where real GDP declines for two consecutive quarters) in the first half of 2008."
Drought and weaker domestic demand saw the economy contract 0.3 per cent in the first quarter, the first quarterly fall since 2005 and larger than the 0.1 per cent fall forecast in the government's May budget update.
As a result, Treasury has cut its economic growth forecast for the year to March next year by half a percentage point to 1 per cent.
Many private sector economists are expecting the second quarter to be as bad or worse.
A series of surveys have shown business and consumer confidence at multi-year lows due to the impact of a slowing housing market, job losses, and higher food and energy costs.
However, the Treasury said the economy could be expected to recover in the second half of the year under the impact of high dairy prices boosting farmer incomes and cuts to personal tax rates, which come into effect on October 1.
