New Zealand‘s economy is projected to have emerged from its recent recessionary period in the concluding quarter of the previous year, following a significant six-month downturn. Analysts from major financial institutions anticipate a modest expansion in gross domestic product (GDP), a comprehensive indicator of economic output, of approximately 0.3 percent for the fourth quarter of 2024. This projection follows consecutive quarterly contractions of 1 percent in the September quarter and 1.1 percent in the June quarter, which precipitated a substantial economic recession.
Kiwibank analysts suggest that the anticipated tepid recovery reflects the persistent fragility of the economic landscape. “Emerging signs of improvement are observed in sectors such as retail trade and accommodation,” stated Kiwibank economist Sabrina Delgado. She highlighted a discernible shift in consumer behavior during the December quarter, driven by reduced interest rates, with increased retail spending potentially stimulating ancillary sectors like arts and recreation. The robust tourism season is also expected to provide a boost to the transportation sector.
Economists at ASB have also forecast a 0.3 percent GDP increase, characterizing the economy’s expected performance as “limping out of the profound mid-2024 economic deceleration.” They further noted, “This growth rate aligns with the deceleration of population growth, resulting in a stagnant economy on a per-capita basis,” as articulated by economists Wesley Tanuvasa and Mark Smith.
However, financial experts are advising vigilance regarding potential data revisions and inherent volatility in the forthcoming figures. In the previous GDP data release, Statistics New Zealand implemented substantial adjustments to historical data, and economists are anticipating further revisions in the upcoming report.
Westpac economists have projected a GDP growth of 0.5 percent, attributing this figure primarily to perceived anomalies in the seasonal adjustment of the data. “Our sector-specific forecasts, along with our GDP nowcast model, indicate virtually no growth in economic activity during the quarter,” explained senior economist Michael Gordon. “Consequently, the reported figures should be interpreted with caution. Revisions to recent economic history are also a possibility.”
The inherent challenges in accurately capturing seasonal variations in data, particularly in the post-pandemic era, have contributed to past data revisions, according to Delgado. She emphasized that “since the onset of the COVID-19 pandemic, the ability to accurately determine data seasonality has presented considerable difficulties, leading to previous revisions.”
The potential for data volatility underscores the importance of interpreting the upcoming GDP figures within a broader economic context. While the anticipated growth signals a potential end to the recession, the modest scale of the projected recovery suggests that the economy remains vulnerable to external shocks and internal structural weaknesses. The confluence of factors, including fluctuating consumer sentiment, ongoing adjustments to interest rates, and the lingering effects of the pandemic, necessitates a nuanced understanding of the economic landscape.
So, even though the expected end of the recession is a reason for some optimism, economists stress the need for a thorough and careful analysis of the upcoming GDP data, taking into account the possibility of revisions and the inherent volatility of the economic indicators.
