December 18, 2024 • 3 mins
An economist says the third quarter was tough in pretty much every sector, for the New Zealand economy.
The major banks are all predicting between 0.2% to 0.4% contraction when Stats NZ releases the GDP data for the third quarter just before 11am today.
It'll likely mean our third technical recession in two years.
ASB's Chief Economist Nick Tuffley told Heather du Plessis-Allan the agriculture and forestry sector were essentially the only positive performers.
He says construction, retail, and manufacturing all felt the pressure, with electricity struggles also taking place during this quarter.
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Episode Transcript
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Speaker 1 (00:00):
So the week of grim economic news continues today. We're
going to get the GDP data later this morning, and
it is expected to tell us that we are back
in recession for the third time in two years. Asb's
chief economist Nick Toughley is with us.
Speaker 2 (00:10):
Now, Hey, Nick, Merry Christmas.
Speaker 1 (00:13):
Ever, merry Christmas to you two. Are you also picking
a fall of about zero point four percent?
Speaker 2 (00:17):
Yeah, we've got zero point four percent, the market consensus
about mine and zero point two and that's where the
Reserve Bank is. The thing we've got to be mindful
of is that there's also some revisions coming along, So
that could mean that what we think happened in September
that even could be a little bit out. So just
watch for quite a lot of quite an event call relief.
Speaker 1 (00:41):
So if it does come through like that, are we
looking at potentially manufacturing having quite a big pullback. But
we are being saved a little bit by the farmers
who are dragging us through this.
Speaker 2 (00:51):
It's a little bit like that. Look, we've got all
that retail pressure, the construction sector pressure, and that's flowing
through the manufacturing before you even add on the impacts
of the electricity challenges that we had over the quarter
as well, where you had quite a bit of shuttering
of some of our sort of large manufacturers as well,
and the electricity sector was basically burning anything expensive and
(01:12):
flama were refined to generate electricity. So the value we
had out of that sector we put in miserable too.
But yes, really good production coming through in the dairy
side for us. We're looking like there was a bit
of activity picking up in there, so that's helping that
good sector and also a slowing service sector out.
Speaker 1 (01:30):
So can we say that if we're going to take
some good news out of this, it's that way through
the worst of it.
Speaker 2 (01:35):
Yeah, I'll say there's two bits of news. We can
focus on the good side here. Hopefully this is the
last sort of sustained contraction that we see and from
here on in it's gradual recovery. And there are the
early signs that we're all feeling a little bit happier
and we found our wallets somewhere. The second thing is
that we likely to see the sort of more complete
revisions coming out that suggest the level of GDP at
(01:57):
the start of this year was nearly two percentage points
higher than what we previously thought so that basically says,
you know, the economy held up a bit better, our
productivity wasn't quite as bad as what we thought. Having
said that, it still felt pretty tough out there for
a lot of people this year.
Speaker 1 (02:12):
Yeah, and is it not going to still feel I mean,
even though we're through the worst of it's still going
to feel tough next year because we're looking at pretty
flat growth potentially, it's a forecast of about zero point
five percent, and still per capita, we're going backwards, aren't we.
Speaker 2 (02:23):
Well, we think we'll be back into I guess the
heck headline growth coming through with the next quarter and
more starting to look progressively more solid next year and
getting out of a per carefitter recession, and it's going
to be a case of more of a gradual turnaround.
Like one of the big things obviously that's caused this
slowdown and the pain has been higher interest rates. They
are on the way down, but because we've got a
(02:43):
lot of people on fixed rate mortgages, it just takes
a while for that impact to flow through and it
will pick up. It will pick up momentum, just in
the short term. We've had a lot of people fixing
for say six months, so that they sort of hopefully
benefit from much lower rates next year. So it's bud
the impact right now. It'll really pick up next year.
Speaker 1 (03:02):
Good Steffanickay, thanks very much. Enjoy your holiday break. That's
a Nick Toughly asb's chief economist. For more from the
My Asking Breakfast, listen live to news talks. It'd be
from six am weekdays, or follow the podcast on iHeartRadio
So the week of grim economic news continues today. We're
going to get the GDP data later this morning, and
it is expected to tell us that we are back
in recession for the third time in two years. Asb's
chief economist Nick Toughley is with us.
Speaker 2 (00:10):
Now, Hey, Nick, Merry Christmas.
Speaker 1 (00:13):
Ever, merry Christmas to you two. Are you also picking
a fall of about zero point four percent?
Speaker 2 (00:17):
Yeah, we've got zero point four percent, the market consensus
about mine and zero point two and that's where the
Reserve Bank is. The thing we've got to be mindful
of is that there's also some revisions coming along, So
that could mean that what we think happened in September
that even could be a little bit out. So just
watch for quite a lot of quite an event call relief.
Speaker 1 (00:41):
So if it does come through like that, are we
looking at potentially manufacturing having quite a big pullback. But
we are being saved a little bit by the farmers
who are dragging us through this.
Speaker 2 (00:51):
It's a little bit like that. Look, we've got all
that retail pressure, the construction sector pressure, and that's flowing
through the manufacturing before you even add on the impacts
of the electricity challenges that we had over the quarter
as well, where you had quite a bit of shuttering
of some of our sort of large manufacturers as well,
and the electricity sector was basically burning anything expensive and
(01:12):
flama were refined to generate electricity. So the value we
had out of that sector we put in miserable too.
But yes, really good production coming through in the dairy
side for us. We're looking like there was a bit
of activity picking up in there, so that's helping that
good sector and also a slowing service sector out.
Speaker 1 (01:30):
So can we say that if we're going to take
some good news out of this, it's that way through
the worst of it.
Speaker 2 (01:35):
Yeah, I'll say there's two bits of news. We can
focus on the good side here. Hopefully this is the
last sort of sustained contraction that we see and from
here on in it's gradual recovery. And there are the
early signs that we're all feeling a little bit happier
and we found our wallets somewhere. The second thing is
that we likely to see the sort of more complete
revisions coming out that suggest the level of GDP at
(01:57):
the start of this year was nearly two percentage points
higher than what we previously thought so that basically says,
you know, the economy held up a bit better, our
productivity wasn't quite as bad as what we thought. Having
said that, it still felt pretty tough out there for
a lot of people this year.
Speaker 1 (02:12):
Yeah, and is it not going to still feel I mean,
even though we're through the worst of it's still going
to feel tough next year because we're looking at pretty
flat growth potentially, it's a forecast of about zero point
five percent, and still per capita, we're going backwards, aren't we.
Speaker 2 (02:23):
Well, we think we'll be back into I guess the
heck headline growth coming through with the next quarter and
more starting to look progressively more solid next year and
getting out of a per carefitter recession, and it's going
to be a case of more of a gradual turnaround.
Like one of the big things obviously that's caused this
slowdown and the pain has been higher interest rates. They
are on the way down, but because we've got a
(02:43):
lot of people on fixed rate mortgages, it just takes
a while for that impact to flow through and it
will pick up. It will pick up momentum, just in
the short term. We've had a lot of people fixing
for say six months, so that they sort of hopefully
benefit from much lower rates next year. So it's bud
the impact right now. It'll really pick up next year.
Speaker 1 (03:02):
Good Steffanickay, thanks very much. Enjoy your holiday break. That's
a Nick Toughly asb's chief economist. For more from the
My Asking Breakfast, listen live to news talks. It'd be
from six am weekdays, or follow the podcast on iHeartRadio
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