Gross domestic product (GDP) data released next week could show a stronger-than-expected post-lockdown rebound, economists say – but that could just set the stage for a technical recession in the coming quarters.
Stats NZ will provide a GDP update on March 17 for the December quarter. GDP is the official measure of economic growth.
In the September quarter, GDP fell 3.7% due to the Delta shutdowns.
Economists expect a rebound in December, but warn that things may have already gone down with Omicron now circulating widely. Credit card spending fell by $640 million in February, which Stats NZ said was likely due to people staying home to avoid the virus.
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ANZ economists said they expected GDP to rise 3.5% between September and December, more than the Reserve Bank’s forecast of 2.3%.
“But let’s not bring out the bubbly yet. After all, this data is already ancient history in a rapidly changing and geopolitically tumultuous world,” they said.
“With Omicron now rife, extreme inflation engulfing household incomes, geopolitical tensions weighing on global sentiment, and housing that has definitely trended lower, strong growth in the fourth quarter will only reduce the risk of a technical recession in the first half of 2022.”
A technical recession is generally defined as two quarters of decline in GDP. If March declines in December and then June declines further from March, that would be a technical recession.
But ANZ economists said that even with the possibility of a recession on the horizon, the Reserve Bank would have to keep raising interest rates anyway because inflation was so high.
“There is of course a risk that the RBNZ will eventually oversteer and cause a hard landing, but taking that risk feels like a less regret scenario than being behind the curve for much longer and risking the credibility of the market. inflation targeting.
Westpac’s acting chief economist, Michael Gordon, expected a 3.8% increase in GDP in December.
“The Reserve Bank expected only a partial recovery in real and potential GDP – reflecting the Covid restrictions which were still in place to varying degrees during the quarter – but with activity still above its potential not inflationary. A stronger GDP result is more likely to indicate fewer restrictions on activity than expected, rather than a greater degree of overheating.
Infometrics chief forecaster Gareth Kiernan expected December to rise 2.5%, leaving activity 1.2% below June.
There was a 60% chance it would be followed by a decline in March, he said.
“This quarter we have the (relatively mild) trade restrictions across the country coupled with the setting of red lights, which will only have a noticeable negative effect on the hospitality and events sectors. However, the spread of Omicron has definitely increased people’s reluctance to come out.
He said there were sharp declines in accommodation spending in February, as well as clothing and footwear, food and drink and arts and recreation. “In other words, there’s almost a de facto lockdown happening when people stay home, either because of isolation requirements or to minimize the risk of catching the virus.”
He said spending was likely to rise in March compared to December, but that would be partly due to inflation. “Particularly for something like fuel, higher expenditure values are likely to reflect price increases rather than sales volumes. mortgage payments will also negatively affect spending in other areas as well.
At BNZ, Craig Ebert was more optimistic.
He said the bank expected a 3% increase in December, but it could be more.
“If it reached, say, 4%, it would be enough for fourth quarter GDP to exceed the pre-Delta high point that it recorded in the second quarter of 2021, to be something like 4.6% above the fix. pre-pandemic, from the fourth quarter of 2019 And this despite persistent alert level restrictions until the fourth quarter of 2021, in particular in Auckland. This potentially strong underlying base should not be lost sight of, as the economy enters choppy waters in the near term, due to a large surge in Covid-19 case numbers.