GDP figures this week should change odds on NZ being in recession

Monday, 15 March 2021

Economists are forecasting little change in GDP in the final quarter of last year or the first quarter of this year.

GDP figures due out this week may shed light on whether the country could already be in a technical recession.

Banks are divided on whether figures that will be released by Stats NZ on Thursday will show the economy grew or contracted in the three months to the end to the December.

After two wild quarters in which GDP first fell 11 per cent and then bounced back 14 per cent, most estimates suggest it will be extremely close.

* Signs growing economy will drift down in 2021

There isn’t consensus among the banks either on whether GDP will edge up or down in the current quarter, ending on March 31, but the sentiment for that period is slightly more negative.

ANZ and Kiwibank are both forecasting GDP will have risen 0.5 per cent in the final quarter of last year and BNZ predicts a 0.4 per cent gain, while Westpac is forecasting a 0.3 per cent decline and ASB a smaller 0.1 per cent drop.

Recessions are generally defined as two consecutive quarters of GDP decline, and three out of the five banks believe the economy will have failed to grow in the current quarter, ending on March 31.

ANZ said its expectation was that 2021 was going to be “a broadly sideways year for economic activity”.

Westpac said the economy has been in a soft patch.

“Indeed, economic data has been hinting that the economy has been cooling since around October or November last year.”

Despite both being among the optimists when it comes to Thursday’s data, Kiwibank said GDP would probably fall in the first quarter of this year as the impacts of the closed border and Auckland lockdowns combined, while BNZ is forecasting a more significant 0.7 per cent drop this quarter.

Infometrics economist Brad Olsen said there was the potential for a technical recession but the numbers were likely to be quite “jumpy up and down this year”.

It was quite possible the December quarter GDP number might be within a margin of error that could see its direction reversed when Stats NZ later published revisions, he said.