With the economy having contracted in the last quarter of 2022, New Zealand is on the brink of slipping into a technical recession - two successive quarters in which GDP falls.
Westpac and BNZ economists are now expecting today’s GDP figures will show New Zealand in recession in the March quarter.
GDP data for the first quarter of 2023 is due to be released by Stats NZ at 10.45am today.
Economists are split on the recession call but the numbers are marginal and no one is forecasting with high certainty.
Westpac is picking a fall of 0.4 per cent - which would mean the country had experienced a recession.
“There’s a high degree of uncertainty around the quarterly result,” Westpac senior economist Michael Gordon said.
“Covid-19 has significantly disrupted the usual seasonal patterns in the data.”
Westpac still saw the economy growing on a year-on-year basis, but with momentum slowing as higher interest rates start to bite.
“We’d characterise the economy as ‘less overheated’ rather than ‘weak’. A substantial cooling-off period is needed to bring inflation fully under control,” he said.
“It looks like the Kiwi economy managed to dodge a (technical) recession over the summer period – but only by the narrowest of margins,” Kiwibank chief economist Jarrod Kerr said.
“Economic activity contracted by 0.6 per cent in the final quarter of 2022. We expect that to be followed by a flat GDP print in Q1.”
BNZ is forecasting a 0.2 per cent contraction for the quarter.
“Even if [first quarter] GDP averts this statistical fate, it will be hard to deny the economy is, more generally, on a cooling trajectory,” said senior economist Craig Ebert.
“That’s the point we’d want to emphasise, not the finer points of quarterly GDP measurement.”
The Reserve Bank forecast a 0.3 per cent rise for the quarter in its monetary policy statement last month.
KiwiBank, ANZ and ASB have picked it to come in flat, rise by 0.2 per cent and by rise 0.1 per cent respectively.
Key measures of economic activity painted a mixed picture, KiwiBank’s Kerr said.
“The RBNZ’s ongoing battle with inflation has seen an aggressive rise in interest rates. And domestic demand is beginning to respond.
But the severe weather events and ensuing rebuild complicated the first quarter, he said.
“We could also be in for some payback from [the fourth quarter] big decline.”
Kiwibank’s base case still involves NZ slipping into a shallow recession later this year.
Economic momentum had clearly slowed, ANZ’s Miles Workman said.
“But [the first quarter] had its fair share of noise, complicating the diagnosis.”
Some of the partial GDP indicators suggested Cyclone Gabrielle impacts could be a little more significant (and negative) than our assumption, but very strong population growth (on the back of net migration) and less seasonal pressure on economic resources could more than offset that.”
There would be plenty of scope for a surprise on Thursday, he said.
ASB’s Nathanial Keall points out that GDP data is backwards-looking and prone to revisions.
“The upshot is we no longer expect the New Zealand economy to enter recession, though we are far from confident in that view,” he said.
“We’re not unique in that analysis, with both the Treasury and the RBNZ revising their own growth forecasts higher.”
The economy still faced “a myriad of headwinds” that would weigh on output, he said.
These included slowing global growth, stressed household balance sheets, and restrictive monetary settings.
“We’re expecting growth to be pretty meagre, and it wouldn’t take much to tip things into recessionary territory. Still, as of now, we expect the GDP growth figures to have a plus rather than a minus on the front.”
ASB expects the economy to expand 1.3 per cent in 2023, before modestly accelerating to 2.5 per cent in 2024, supported by more stimulatory monetary policy once the Reserve Bank eventually cuts the OCR around mid-2024.