Strong headline, masks recession for some

Don’t let the stonking GDP headline of 1.7% production growth in just three months mislead you. Growth was strong in the June quarter, compared to March, only because March was nothing to write home about. The March quarter was a write-off – as we all sat spluttering at home with Omicron, unable to function to our potential and not allowed to even if we had felt up to it.

If we look at where the past few months of production GDP sat compared to a year ago, we were only 0.4% above last year. That is stuttering to say the least, and is unevenly spread across the economy.

For me, the expenditure GDP series tells a particularly interesting tale – our exporters were shipping goods and services like crazy as the commodity price boom, our relative geopolitical appeal, and our freshly-opened borders saw our goods and services in high demand. Heck – exports were up 20% between March and June. However, offsetting these exports were households and businesses shutting their wallets – household expenditure fell 3.2% in the June quarter, while gross fixed capital formation (investment) fell 3.3%. In short, people are worried – we have seen it in consumer and business confidence surveys – and it makes sense given discretionary incomes are being pinched by inflation and surging mortgage rates.

Where to from here is anyone’s guess. But I am expecting a lumpy September quarter to come, and the uneven economic experiences of different people and industries to continue. For some it is still boom times, while for others we may as well be in a recession.

If you want to read more on this topic, then check out Statistics NZ’s GDP data release, or alternatively Melanie Carroll at Stuff wrote a great round-up. My key comments to Melanie were:

Independent economist Benje Patterson​ says there is no recession but some parts of the country and some people are experiencing recession-like conditions. “Everyone’s got jobs and everyone’s got wage increases. But for some people that’s just not enough and in real terms, they’re actually going backwards.”