NZ out of recession but 'don’t pop the champagne just yet' (2024)

Liam Dann is business editor-at-large for theNew Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined theHeraldin 2003.

New Zealand’s gross domestic product (GDP) rose 0.2% in the March 2024 quarter, according to figures released by Stats NZ today.

That means the economy is no longer technically in recession, although that definition may not mean much as the protracted downturn looks set to continue for months to come.

“Don’t pop the champagne just yet,” said ASB chief economist Kim Mundy.

“Basically, although growth was positive [barely] this quarter, the economy is still soggy. For example, the economy is still some 0.5% below the [third quarter] 2022 peak.

The topline figure was also flattered by high population growth. GDP per capita decreased by 0.3% in the March 2024 quarter.

This was the sixth consecutive quarterly fall. On an annual basis, GDP per capita fell 2.4%.

“The details of the GDP data were a little softer than the headline suggests, particularly services industries and the expenditure cut,” said ANZ Senior economist Miles Workman.

“Today’s release doesn’t change the fact that economic momentum is anaemic, particularly from domestic demand and per capita perspectives. We remain comfortable with our OCR call for cuts from February 2025.”

There was a range of results at an industry level, with 8 of the 16 industries rising this quarter, Stats NZ said.

The primary sector was the predominant driver of the rise in GDP. Agriculture, forestry and fishing production rose 0.4% [quarter on quarter]. Within this, there was a 5.5% lift in forestry and logging activity, which was consistent with export activity.

In overall output, rental, hiring and real estate services were up 0.9%.

Electricity generation drove a 2.9% increase in electricity, gas, water and waste services.

Falls occurred in several industries including construction, business services, and manufacturing.

Construction was down 3.1% for the quarter. Private consumption expenditure rose 1.6 per cent but central government and local government expenditures were down 0.3% and 0.1% respectively.

The country’s economy contracted in both the September and December quarters last year, meeting the most widely accepted definition of recession.

Ahead of today’s GDP release from Stats NZ, bank economists were divided on whether the country’s economy had grown or shrunk in the first three months of this year.

Westpac, BNZ and Kiwibank all picked another contraction but ANZ and ASB forecast growth, just.

The forecasts, however, were all in a narrow band, ranging from a growth of 0.2% to a decline of 0.2%.

Westpac senior economist Michael Gordon said that the “forecast miss” did little to change his view of the overall economy.

“We expect growth to remain minimal over the course of this year, and indeed recent indicators suggest that the June quarter is shaping up to be quite soft.”

Abhijit Surya at Capital Economics noted the result was exactly in line with the RBNZ’s expectations.

“What’s more, the details of the GDP print make for a much grimmer reading than the headline result,” he said.

Earlier today

New Zealand has been experiencing low unemployment, high interest rates and high inflation.

Yesterday, the Reserve Bank outlined plans to get the country back to 2% inflation.

Reserve Bank chief economist Paul Conway outlined issues affecting the economy and also hinted at how the country might benefit from more up-to-date economic statistics.

In other economic news yesterday, ANZ warned the country’s current account deficit was too wide and a risk to New Zealand’s country’s sovereign debt rating.

A current account deficit indicates New Zealand is spending more than it is earning overseas.

Despite the debt warning, the current account shortfall narrowed slightly to $27.6 billion (6.8% of GDP) in the March year, compared with $27.9b (6.9% of GDP) in the December 2023 year.

And there is another thing for those betting on the GDP outcome to consider, because Stats NZ might revise its previous data.

Revisions can happen when new or updated information arrives, a change to data collection methods happens, or an error in earlier published data is discovered.

And since the economy only contracted by 0.1 per cent in the December quarter, a revision of those stats to positive growth would mean New Zealand never entered recession at all.