Last week I noted how New Zealand’s economy is heading into recession, with GDP falling 0.6% over the December quarter.
The result was worse than predicted by most bank economists and dramatically lower than the 0.7% increase in GDP forecast by the Reserve Bank.
The Reserve Bank’s February Monetary Policy Statement explicitly forecast that the economy would go into recession, registering a “peak-to-trough decline in the level of GDP over 2023… [of] about 1 percent” on the back of “higher interest rates, lower house prices and a weaker labour market”:
However, it did not expect the recession to arrive until later in the year:
The Westpac McDermott Miller Consumer Confidence survey is out and signals further trouble ahead for the New Zealand economy, with consumer confidence continuing to “languish at extremely low levels” with households across the country “continuing to grapple with skyrocketing living costs, higher mortgage rates and a deepening downturn in the housing market”:
“Weakness in consumer confidence and mounting financial pressures are already weighing on household spending appetites”, Westpac notes. “And with those pressures set to become even more pronounced, we expect to see increasing numbers of households winding back their spending over the year ahead”.
In particular, expectations of economic conditions over the coming year are stuck in the gutter:
While longer-term expectations on the economy are tracking at record lows:
Household finances are likewise in the toilet:
And “the increasing pressure on household finances is weighing on their spending appetites”, according to Westpac, “with the number of households who think it’s a good time to make a major purchase is languishing close to record lows”:
Overall, Westpac says “confidence remains around the sorts of levels that we saw during the recession in the early-1990s and again during the Global Financial Crisis in 2008/09”, suggesting a technical recession is locked-in.
