We are out of recession - and with a quarterly GDP rise that has surpassed all expectations.
Statistics NZ reports that GDP grew 0.7% in December. That's more than double the growth the Reserve Bank expected (0.3%), and is more than major bank economists expected.
Westpac senior economist Michael Gordon said the result "was ahead of our forecast of +0.5%, which in turn was at the higher end of the range of market forecasts (median +0.4%)".
"We’d call this a genuine upside surprise, in the sense that the growth was driven more by real activity and less by the seasonal issues that we identified in our preview."
He said sector-by-sector growth added up to around 0.3%, with better-than-expected contributions from a range of service sectors including healthcare, professional services, and art and recreation.
"On an annual basis, GDP was down 1.1% on the same time a year ago. Again, that was better than the -1.3% that we expected, and was an improvement on the -1.6% in the September quarter," Gordon said.
The move into positive growth for the economy in the December quarter follows a short, but very sharp, recession in the middle of last year that saw GDP sink 1.1% in the June quarter and a revised 1.1% in the September quarter (previously reported as a drop of 1.0%).
The big downturn in the economy came after the Reserve Bank (RBNZ) had hiked the Official Cash Rate (OCR) up all the way from just 0.25% to 5.5% in order to stamp out a wave of price hikes that saw inflation surge to 7.3% by mid-2022.
Inflation's now back within the targeted 1% to 3% range, at 2.2%. But unemployment's rising, having hit 5.1%, after at one point being as low as just 3.2%.
The RBNZ's now pushing the OCR down, having dropped it in a series of cuts since August 2024 to the current 3.75%, with two more 25 point cuts widely expected at the OCR reviews next month and in May.
And the lower interest rates are clearly beginning to have the anticipated stimulatory effect.
Stats NZ said 11 of the 16 industries increased this quarter. The largest rises were from rental, hiring, and real estate services; retail trade and accommodation; and healthcare and social assistance.
"Higher spending by international visitors led to increased activity in tourism-related industries such as accommodation, restaurants and bars, transport, and vehicle hiring," Stats NZ economic growth spokesperson Katrina Dewbery said.
The largest falls were in construction, and information media and telecommunications.
Construction fell 3.1% in the December 2024 quarter, and has been declining since the March 2024 quarter.
"The fall in information media and telecommunications was driven by decreases in telecommunications and internet services, and broadcasting and internet publishing services," Dewbery said.
GDP per capita rose 0.4% during the December 2024 quarter, its first rise in two years.
The expenditure measure of GDP rose 0.8% during the December 2024 quarter, following a 0.9% fall in the September 2024 quarter.
Household consumption expenditure rose 0.1% this quarter, with increased spending on durable items such as audio-visual and telecommunication equipment.
34 Comments
The rockstar economy is back baby 🎸
More sad cover band, but better then a - print
I know a local engineering company that laid off 9 of 25 staff yesterday, the growth is not being evenly shared.
Yet another example where you chose to focus on the bad, rather than the good. This is irrelevant of what actually happens, it's a character trait, a mentality if you like.
Yes, Yvill - this is irrelevant of what actually happens.
And you're quite right, emotions shouldn't be part of it.
A quarter is 90-odd days. That's 9 billion barrels, give-or-take, burnt. Never to be had again. And all infrastructure barring that built in the quarter, is older; more requiring of maintenance (meaning less surplus from the last billion barrels, than from the first.
But we don't count all that. If we did, we would realise we are in PERMANENT recession.
Which makes the headline, above, incorrect. And by some margin.
You totally miss my post PDK, it's not about "barrels", it's about people's mentality. At any given time, there are good things and bad things happening, some people choose to focus on the good, and others forever look for the bad, the lack of… they live in fear of "the end is nigh" and they can only write negative posts. Some get so entrenched in negativity, that they end up revelling in it. You decide which type of person you are.
Energy descent is real
Attitude is attitude.
The latter cannot alter the former.
Your sole focus on energy prevents you from seeing other important factors. The "latter" as you put it, is what allowed mankind to evolve out of the stone age, and harvest the former.
There is a shared reality....in the short term attitude can have an impact, but it cannot change the trajectory. The road to destination is seldom a straight line.
We did not get from the stone age to today, thanks to people who believed things cannot be done. Before we can create anything at all, we have to first believe that it can be done. "we cannot farm animals, they'll run away, what good is a wheel for, the earth is flat, man cannot fly, we cannot watch an image in one place of an event happening in another place simultaneously...
Likewise, we don't know what extraordinary things mankind will discover or create in the future, but we do know it won't be invented by negative people who don't believe anything new and amazing can be created.
Nifty,
Ageing rock stars are seldom a pretty sight and overall, our economy is more like an old rocker who never made it big.
If we're no longer in a recession, the RBNZ has less reason to cut rates. A strong economy means higher rates. Very good news.
You really need to go read the RBNZ mandate...
Inflation and unemployment. However, they’re more likely to cut rates in a recession than when the economy isn’t in one. Wait for the next inflation print, it might tick up from 2.2% like the US, UK, Japan, and Canada to a range that restricts further cuts, and unemployment might improve.
No, just inflation.
So, they dropped the dual mandate in 2023 and aren’t focusing on employment anymore. Doesn’t that mean there's less reason to cut rates if unemployment goes up? Now, to justify lower rates, you need an environment of low inflation since unemployment is no longer the focus.
I'm assuming this is about house prices. Can you help me see how dropping the dual mandate affects house prices?
https://www.interest.co.nz/economy/131663/rbnz-chief-economist-paul-con…
Read and comprehend, you'll learn something.
Central banks are like The Drew Carey Show, where everything’s made up, and the points don’t matter. In my opinion, the debt market has mostly worked in the direction of easy money until recently, so they’ve got to build a narrative based on where it goes. They can drag us in and out of a recession by half a point, depending on whether they need to cut, pause, or hike.
And it can all be revised later.
This latest GDP figure won't affect the 2 planned OCR cuts. You're just being a cheerleader for what you would like to happen.
Supporting a team in sports no matter what, is great. In finance though, it's best to be nimble, open minded, and not stuck in one camp no matter what.
‘You're just being a cheerleader for what you would like to happen’
95% of the comments on this website have been exactly this for as long as I can remember. About 5% discussing what is happening and what could happen/risks etc - instead of promoting what is best for themselves ie their own financial self vested interests.
Yes indeed (sadly).
As a positive the use of the terms spruiker and DGM have reduced dramatically since the start of the month. Less spam to work through.
Agreed and welcome.
Yes. A certain side of that coin has either been banned, or has departed. Much easier reading indeed.
Both sides Averageman. By saying "a certain side of the coin", you show your own bias.
As a positive the use of the terms spruiker and DGM have reduced dramatically since the start of the month
The 'spruiker' moniker is crucial for understanding the Aotearoa economy. And, IMO, to some degree, so is DGM. Critical thinking and going against the flow is not seen as a particularly admirable in our country.
Anyway, I thought 'Ponzinomics' was more taboo. Incidentally, I recently watched an old Micheal Burry presentation who was saying that the moment your interest payments exceed tax revenue, your country officially becomes a Ponzi.
I'm with IT on this one -I am not seeing the "growth" and it is actually still getting worse - so my money is on a negative post after summer
and offshore issues have the potential to upset our inflation numbers - and it has been mostly imports that have brought us back into target range
I’m a bit on the fence with this one mainly due to the weakness of statistical measurement. GDP is an index which we get the %age change from quarter to quarter. It’s been such a bad decline in the index ( especially per capita) the last few years when generically we should see growth that a lift in %age terms ( in todays number) still isn’t seeing our economy larger for a while yet. However we could well see positive numbers from quarter to quarter. Fundamentally this won’t really read as a stronger economy for a while though.
(edit)
and in terms of the next 2 eases being a done deal - 2 things to note:
Adrian is gone so that’s not set in stone
The futures market has the full 2 eases priced already so in terms of risks I’d say it’s to less eases rather than more after today.
I was at a fielday recently for 3 days.
Farmers are way more positive than at this time last year.
Interest rates down, sheep and beef meat prices higher, dairy at a record high of $10.
It's very easy to be negative but some parts of our economy are doing Ok. Fruit growers in Hawkes Bay are also generally looking at a good year financially.
All of the above bringing foreign currency into NZ.
I acknowledge retail and some in the service sector are doing it tough.
"This latest GDP figure won't affect the 2 planned OCR cuts."
If you look at the US central bank, whenever they get numbers showing a strong economy while inflation is above target, they just hold rates or hike them since unemployment isn’t an issue.
Same thing here, if NZ inflation rises above target, that’s their primary focus, and you might not see cuts, especially if GDP looks good.
Could inflation stay at 2.2% or drop? Yes, and that could lead to cuts. But it could also go the other way.
I’m just saying there’s less of a case to cut rates if the economy looks good, that’s consistent with what happens overseas.
Suggest for the immediate future at least, Mr Orr’s departure would support that rationale. Mainly because the decisions at the RBNZ might now be more broadly and flexibly conducted. There was a sense that, while in charge, Mr Orr was inclined to presuppose forthcoming data and thus determine a position too far in advance and then be loath to come off it, even when outcomes plainly hadn’t eventuated as originally thought.
I agree - as a side issue the reason for Mr Orr's departure appears to still be unknown - unless I have missed some announcement. From NZ Inc's perspective this is a minus that should be rectified as no reason to put Mr Orr and his previous role above NZ's best interests
Recession ends is a bold call...a more accurate appraisal may be that the most recent estimate of GDP has been in positive territory, subject to review. Meanwhile in the real world the cost of living increases and employment is harder to find.
National will lap this up, not sure what they are doing to cause this, its more a bounce from lows, lets see what the year brings.
Its way better then a negative print, IMHO National need a spending budget not a balanced one
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