Is New Zealand officially in recession? Given we’re certainly in a deep per capita recession it might be a moot point. But new GDP data on Wednesday will give us some insight into just how tough things got in the fourth quarter of 2023.
After a 0.3
GDP preview: Hold the champagne, recession or not, we’re going backwards
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“Whatever the exact number the conclusion will be the same, New Zealand’s economic growth has stalled and on a per capita basis it is going backwards at a rapid rate of knots.”
Kiwibank’s Jarrod Kerr is also picking we’ve skipped a recession – just. But he warns to “hold the champagne”.
“Regardless of whether or not we were ‘technically’ in a recession, flat growth is still not a pretty result,” he said.
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“A flat print, as we are expecting, would mean the Kiwi economy was completely stagnant since this time last year. And in the year ended December 2023, we’re expecting growth of just 0.7 per cent.”
It was even uglier if we looked at growth on a per capita basis.
“On a per capita basis we are already in a recessionary environment. In the September quarter alone GDP per capita contracted 0.9 per cent. And a painful 3 per cent decline over the year. Last year likely ended on the same sour note,” Kerr said.
“Aggregate output may be unchanged, but for the average Joe or Jane, the numbers will likely show a shrinking slice of the economic pie. So, on the ground, it will still feel like a recession.”
ANZ’s economist Miles Workman warned that “disentangling the noise v signal in GDP data remains a harder task in the post-Covid era”.
He said quarterly growth momentum is travelling within a range of -0.2 and +0.2 per cent
Parts of the economy, such as international tourism, were still well shy of normal and that could culminate in surprisingly weak services exports, he said.
But ASB economist Nathaniel Keall is picking broad-based weakness, with all three GDP categories – primary sector, goods and services – flat or contractionary.
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In the primary sector, higher commodity prices and better weather had driven a small lift in dairy output, but forestry and fishing hadn’t experienced the same gains, he said.
With goods, surveys suggested manufacturing softened in the fourth quarter – the seventh decline of the past eight quarters.
“Building work data imply a small pick-up in construction, powered by the non-residential sector,” Keall said.
In the services sector, survey data pointed to substantial falls in transport, postal and warehousing services, and in arts, recreation and other services.
Retail trade and accommodation, and wholesale trade also looked to have turned in another soft quarter, he said.
With high net migration flattering the topline result, ASB is picking that per capita GDP fell by as much as 1.1 per cent in the fourth quarter.
“At this point, the slice of the economic pie available for each Kiwi is only about 0.6 per cent bigger than it was in late 2019,” he said.
“By the time per-capita GDP begins growing again, it could be nearly 1.5 per cent smaller by our reckoning.”
The headwinds facing the New Zealand economy weren’t unique, he said.
“Flatlining GDP growth and deteriorating GDP per capita are features of many Western economies outside the US. Nonetheless, given the extent to which NZ has relied on ‘bums on seats’ to boost the economy, the tumble in GDP per person is particularly dramatic here. Serious focus needs to be given to boosting productivity, lest our standard of living fall further behind the Aussies and the Yanks.”
